Have been provided hypothetical items and think I have catogorized them correctly below:
*Assets: cash at bank, inventory, acc receivable, pre-paid insurance, provision for doubtful debts (which I subtract from total), building, accum depreciation (again, which I subtract)
*Liabilties: accounts payable, wages payable, mortgage
*Profit and loss, which I understand will be put into Equity on balance sheet: net sales, interest from bank, wages expenses, telephone (added sales & interest then subtracted wage expenses & phone to get profit to add to Equity side)
However, I can't get it to balance (A = L + E) by adding each value assigned to items above. Do I need to start with a financial journal & make entries on either side? Have I categorised these items incorrectly? Is it not as simple as calaculating values as described?
Thanks muchly.

I would start with a Worksheet consitsting of a Trial Balance, then you can separate your accounts to the Income Statement and the Balance Sheet. Your Income Statement columns will not balance in the Worksheet because of Net Income or Net Loss so you will have to add one row containing the difference between your debits and credits to get your Income Statement columns to balance. The difference between your debits and credits is known as Net Income or Net Loss will also be added to the Balance Sheet of the Balance Sheet to Retained Earnings so that your Balance Sheet columns will balance.

The Worksheet will help keep you in preparing your financial statements.

Hi Pready,

Thank you so much for the help. I have done up trial balance sheet as suggested with the following debits and credits:

*Debits: cash, acc receivable, stock, pre-paid insurance, employee wage expenses, telephone expenses, building
*Credits: acc payable, net sales, wages owing, bank interest earned, mortgage, provision of bad debts (% of net sales), accum depreciation

However, the columns still don't balance. I have doubled checked that I have each item in the correct column (think I am correct - please help if I have done them wrongly), checked math, checked accounting errors (eg transposition error). I note that the difference between my credit and debit columns is the same as the difference between assets and liabilties + equity when I originally tried to do the balance sheet without a trial balance sheet. Perhaps I am making the same error?
You mentioned in your post that this dfference is retained earnings and thus is part of the equity section on the balance sheet? I may misunderstand you... it would be great if I could use this difference however I feel that I am trying to 'make' it balance rather than it really balancing! Retained earnings was not provided in the original list of items so that confuses me a little bit.
I have looked at this so many times but I can't seem to get it right. Can you see what I am doing wrong? Hopefully retained earnings is where it is at!
Lots of thanks for your time,
Peggy

From your accounts it looks like you are missing Equity accounts i.e. Common Stock, Owners capital, Additional Paid-in Capital, Owners Drawing, and Retained Earnings.

If this is part of the problem that you need to find, then subtract Liabilities from your Assets to get your Owners Equity amount. Once you have this amount subtract your sales and add your expenses to get your beginning Owners Equity amount.