Balance Sheet and Trial Balance Do Not Match

Last reviewed: 07/16/2010
Article ID: R10984

The information in this article applies to:

SUMMARY

The Ending Balance on the Trial Balance should equal the Current Balance on the Balance Sheet. If the balances on the Trial Balance and the Balance Sheet do not match, use the procedures listed below to correct the balances.

MORE INFORMATION

The balances on the Trial Balance and Balance Sheet are obtained using two different methods, thereby allowing you to "cross check" the figures.

Trial Balance Figures

Beginning Balance

Asset or Liability Accounts - The beginning balance is retrieved from the prior month's ending balance on the Balances tab in the Chart of Accounts (e.g., the May ending balance is the June beginning balance).
 

Income or Expense Accounts - The beginning balance is calculated by adding the activity for each month of the fiscal year through the month prior to the Beginning Calendar Month specified.

Ending Balance

All Accounts Except Retained Earnings - To calculate the Ending Balance for all accounts, the report then uses the Beginning Balance plus or minus the actual journal entries ("Activity") for the specified period that the report is run.

Retained Earnings Account - The "Activity" for the Type "R" account is calculated by subtracting the Beginning Balance from the Ending Balance. Both of these balances are taken from the Balances tab in the Chart of Accounts.

The Gain (Loss) amount posted to the Retained Earnings account, found at the bottom of the Trial Balance, is calculated using the following formula: (Type "R" Account Ending Month Balance) - (Type "R" Account Beginning Month Balance) - (Manual Entries for the Type "R" account for the specified time frame).

Balance Sheet Figures

The Balance Sheet retrieves its figures directly from the Chart of Accounts for all accounts except the Type "R" (Retained Earnings) account. The Retained Earnings figure is calculated when the Balance Sheet is run using the following formula:  Retained Earnings = Assets - (Liability + Owner Equity).

Differing balances on the Trial Balance and Balance Sheet are typically a result of editing the current or previous month's balances in the Chart of Accounts. However, in the case of the Type "R" (Retained Earnings) account, differing balances can also be caused by making single-sided (i.e., unbalanced) journal entries.

Tabs3/Tabs3 Trust Accounting Software (TAS) Integration Note:  If using these integration methods, verify that the accrual accounts created in GLS are not included on these financial report comparisons.

RESOLUTION

  1. Run a Data File Integrity Check and resolve any errors.
  2. Preview a new Trial Balance for the specified month.
  3. Verify that the debits and credits are in balance on the Trial Balance. If the message "DEBITS AND CREDITS DO NOT MATCH" is shown, this must be resolved before you continue.
  4. Look for asterisks (*) to the left of the account numbers on the Trial Balance. GLS compares the ending balances on the Trial Balance to the balances for the same period in the Chart of Accounts, as shown in Figure 1. If the balances do not match, GLS prints an asterisk to the left of the account number, as shown in Figure 2.


    5. Figure 1  Comparing the reports
     Date: 01/31/2009             Trial Balance


                                         Ending Balance
                                           01/31/2009

 Account #  Dept    Description        Debit      Credit 
    110.01   01   Bank Account #1  112510.39
    110.02   01   Bank Account #2     292.89
    		   
     Date:  01/31/2009   Detail Balance Sheet

                                   Current
       Description                 Balance
   Assets
   
   Cash
       Bank Account #1           112510.39
       Bank Account #2              292.89


    Figure 2  Trial Balance with an asterisk next to account 110.02
     Date: 01/31/2009                              Trial Balance                                            Page: 1 
                                       Burns, Jensen & Powers, P.C.
 
 Department: 0 to 99
                                          Beginning Balance                                    Ending Balance
                                              01/01/2009            ---- Activity ----            01/31/2009
 Account # Dept Description               Debit       Credit        Debit       Credit        Debit       Credit 
 --------- ---- -----------               -----       ------        -----       ------        -----       ------ 
 
    110.01  01  Bank Account #1            0.00                 112510.39         0.00    112510.39
 *  110.02  01  Bank Account #2            0.00                    278.85         0.00       278.85
    130.01  01  Furniture & Fixtures       0.00                   7500.00         0.00      7500.00
  1. If there is an asterisk next to any account number on the Trial Balance, preview a Trial Balance for the prior month. If the prior month's report includes asterisks to the left of one or more account numbers, preview the Trial Balance for the month prior to that. Keep working backward until you find a month that has no asterisks on the Trial Balance. Once you have identified the most recent month with no asterisks, preview a Trial Balance for the following month (i.e., the earliest month in which asterisks appear on the Trial Balance). Print a copy of the report as well, for your records. If you do not want to start with the month where the discrepancy began, skip to the section labeled Alternative Instructions.

  2. While previewing the Trial Balance for the first month in which there are asterisks on the Trial Balance, click the account number of the first "Type A" or "Type L" account that has an asterisk next to it to drill down to the account. Find the Ending Balance amount from the Trial Balance and enter that amount on the Balances tab in the Chart of Accounts for the month of the report. In our example, you would enter the January 2009 ending balance from the Trial Balance into the Jan 09 field on the Chart of Accounts Balances tab, as shown in Figure 3. Do this for all "Type A" and "Type L" accounts.

    Figure 3  Editing the Chart of Accounts balances
     Date: 01/31/2009              Trial Balance
 

                                          Ending Balance
                                            01/31/2009

 Account #  Dept    Description        Debit      Credit 
    110.01   01   Bank Account #1  112510.39
    110.02   01   Bank Account #2     292.89
    Balances tab

    3. Note: If GLS prevents you from editing the balances found on the Balances tab, select the Allow editing of account balances check box for Client 1 in the Edit GLS Client program (Utilities | Edit GLS Client). After all editing is completed and there are no asterisks on the Trial Balance, it is recommended that this option be disabled.

    Note: Editing is not a standard bookkeeping practice and should only be done when an asterisk is printed next to an account number on the Trial Balance.

  3. Preview the Trial Balance again for the same month, and verify that there are no asterisks to the left of the account numbers.
  4. Preview and print the Trial Balance for the next calendar month and repeat steps 6 and 7 for all "Type A" and "Type L" accounts for each month. Be sure to correct the balances in the current fiscal month as well.
  5. Run a Data File Integrity Check (Utilities | Data File Integrity Check), making sure that the Read Only check box is cleared. If one or more error 76s are reported, this indicates that the Type "R" (Retained Earnings) account balance for one or more months was incorrect. The Retained Earnings account balance will be adjusted automatically, and the Data File Integrity Check Error Report will show a separate error 76 for each month in which the Retained Earnings balance is adjusted. The G5DFIC76.LOG file will be created or appended to in the GLS program folder. This file provides a detailed list of all changes made to Retained Earnings account balances. For complete details on DFIC error 76, see KB Article R10980, "DFIC Error 76 - Retained Earnings Mismatch".

Note: If the Trial Balance prints asterisks to the left of income or expense account numbers, see KB Article R10985, "Income Statement and Trial Balance Do Not Match" for instructions on fixing those accounts.

ALTERNATIVE INSTRUCTIONS

In cases where you do not want to correct the balances on the Trial Balance and Balance Sheet to match for all months, follow these instructions.  For example, the two reports do not match for 2008; however, the balances need to be correct starting January 2009 through the current reporting month.

  1. Always begin one month prior to the starting point.  In the example above, start with the correct balances as of December 2008. You may want to contact the firm's accountant to get the correct starting balances.

    2. IMPORTANT: If you do not know the correct balances for the prior month, do NOT proceed with these alternate instructions. Contact the firm's accountant or use the instructions provided in the Resolution section of this article.

  2. Enter the appropriate account balances for each account on the Balances tab of the Chart of Accounts program.
  3. Print a Detail Balance Sheet.  Verify that each account balance is correct for all accounts except the Type "R" (Retained Earnings) account.
  4. Preview a new Trial Balance for the current month, and print a copy of the same report for your records.
  5. In the preview window, click the account number for the first account to drill down to that account in the Chart of Accounts program. On the Balances tab, enter the Ending Balance amount shown on the Trial Balance for the month of the Trial Balance (e.g., enter the February 2009 Ending Balance from the Trial Balance in the Feb 09 field on the Chart of Accounts Balances screen). Repeat this step for all "Type A" and "Type L" accounts.
  6. Preview the Trial Balance again for the same month and verify that there are no asterisks to the left of any account numbers. The presence of asterisks indicates that the Ending Balance on the Trial Balance does not match the balance shown for that month on the Balances tab of the Chart of Accounts program for that account.
  7. Run a Data File Integrity Check (Utilities | Data File Integrity Check), making sure that the Read Only check box is cleared. If one or more error 76s are reported, this indicates that the Type "R" (Retained Earnings) account balance for one or more months was incorrect. The Retained Earnings account balance will be adjusted automatically, and the Data File Integrity Check Error Report will show a separate error 76 for each month in which the Retained Earnings balance is adjusted. The G5DFIC76.LOG file will be created or appended to in the GLS program folder. This file provides a detailed list of all changes made to Retained Earnings account balances. For complete details on DFIC error 76, see KB Article R10980, "DFIC Error 76 - Retained Earnings Mismatch".

Note: If the Trial Balance prints asterisks to the left of income or expense account numbers, see KB Article R10985, "Income Statement and Trial Balance Do Not Match" for instructions on fixing those accounts.

REFERENCES

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