Hi everybody.
Could you help a beginner to understand next.
I want to create a balance sheet and a trial balance.
I don’t have any liabilities, revenues
Only administrative expenses = $7 000,00
OWNER'S EQUITY = $10 000,00


My income statement

Revenues 0
Total revenues 0
Expenses 7 000,00
Total expenses 7 000,00

Net income** - 7 000,00

Then for a balance sheet


Beginning owner's equity 0
+Owner's investment 10 000,00
+ Net income** -7 000,00
Subtotal 3 000,00
-drawing 0
Ending owner's equity 3 000,00

And a Balance sheet

ASSETS
____________________________--
Cash 3 000,00

TOTAL ASSETS 3000,00

LIABILITIES 0
TOTAL LIABILITIES 0

Paid-In Capital 10000,00

Retained Earnings - 7 000,00

Total Equity 3 000,00
_________________________________________

TOTAL LIABILITIES & OWNER EQUITY 3 000,00

How and where (debit or credit) should I show Retained Earnings - 7 000,00 in Trial balance
I did in this way but not sure that I am correct.
Could you help me to understand this

DEBIT

Cash 3000,00
Expenses 7 000, 00
Retained Earnings Deficit (7000,00)

Total DEBIT 3 000.00


СREDIT

Owner Capital 3 000,00

Total CREDIT 3 000.00

or how, why and where I should put this deficit in the trail balance?

You do not need to put deficit on the trial balance, it will show
Cash 3,000
Exps 7,000

Capital 10,000

Balance sheet:
Cash 3,000
Equity 3,000

Quote:

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Originally Posted by rehmanvohra

You do not need to put deficit on the trial balance, it will show
Cash 3,000
Exps 7,000

Capital 10,000

Balance sheet:
Cash 3,000
Equity 3,000

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Thank you very much for your answer.
It was my first time I did it.
First I did it as you said, but then I found the form of the balance sheet that contained not only the account Equity but these fields

Paid-In Capital

Retained Earnings

Total Equity

I decided to make it more detailed (I read about this account Retained Earnings and there was a definition that if it has a negative (debit) balance it calls a deficit )
So I put the data in these 3 fields in the Balance sheet and it lloked logical and fine, but THEN I have found the form of a Trial balance that contained account Retained Earnings too.
Only on Credit side .
S even now I don't understand why I can not show this data - 7000.00 in this field.
In fact I I have this Account and it has such negative balance so it requires (only how?) me to show it in Trial balance or I am wrong?
I see that the sum of this Account equals Expenses and maybe that is why I should not show it . But for what cases they included this field in the form of Trail balance.

Could you help me understand it completely?
+ please ,сould you suggest the nice source that shows all aspects (steps) of creating first trial balance then balance sheet.

Thank you very much

Trial balance is a list of balances appearing in the general ledger. According to your question a trial balance will show:
DEBITS
Cash 3,000
Expenses 7,000
Total 10,000
CREDITS
Paid in capital 10,000
Retained earnings 0
Total 10,000

After preparing a trail balance you would first prepare an income statement, as follows:
Revenues 0
Expenses 7,000
Deficit 7,000

Now you prepare a balance sheet
Assets
Cash 3,000
Total 3,000
Liabilities and equity
Liabilities 0
Equity
Paid in capital 10,000
Retained earnings (7,000)
Total 3,000

I do not know which text you are studying from, but I can suggest following website:

If you need powerpoint slides to make your life easier, please send me your email address.

Principles of Accounting

Quote:

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Originally Posted by rehmanvohra

Principles of Accounting

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Thank you very much for your answers + source.
It really helped.

Quote:

---

Originally Posted by rehmanvohra

Trial balance is a list of balances appearing in the general ledger. According to your question a trial balance will show:
DEBITS
Cash 3,000
Expenses 7,000
Total 10,000
CREDITS
Paid in capital 10,000
Retained earnings 0
Total 10,000

After preparing a trail balance you would first prepare an income statement, as follows:
Revenues 0
Expenses 7,000
Deficit 7,000

Now you prepare a balance sheet
Assets
Cash 3,000
Total 3,000
Liabilities and equity
Liabilities 0
Equity
Paid in capital 10,000
Retained earnings (7,000)
Total 3,000

I do not know which text you are studying from, but I can suggest following website:

If you need powerpoint slides to make your life easier, please send me your email address.

---

Thank you very much.

DEBITS
Cash 3,000
Expenses 7,000
Total 10,000
CREDITS
Paid in capital 10,000
Retained earnings 0
Total 10,000

I see you put Retained earnings 0
Сould you tell me When it is not 0.?
And I uderstood you correct these Retained earnings are always different for Trail Balance and Balance sheet?

It is confusing in the next
It Trial balance we put it as a 0
but in Balane sheet we put the sum from Income statement.
When it contains some values in Trial balance?


Thank you very much

In the trial balance your debits equal 10,000 so your credits must equal 10,000

When you prepare an income statement your debits and credits will not equal, and the difference will be net income.

When you prepare the balance sheet the debits and credits will not be equal, and your difference will be net income from the income statement.