How to Do a Cash Basis Trial Balance

In cash basis accounting, income is recorded as it is collected and expenses as they are paid. This is different from accrual basis accounting, which records income and expenses as they occur. Cash basis accounting is generally used just for income tax purposes. Businesses generally keep accounting records using the accrual basis method, which means you must make some adjustments before you can run your trial balance. The purpose of the trial balance is error detection because it checks that all of the debits and credits on the ledger equal out.

Gather the opening and closing amounts from your financial statements for the following accounts: Capital Cost Allowance, Prepaid Expenses, Accounts Payable, Capital Gains, Inventory and Accounts Receivable. Enter the name of each account in column A of a spreadsheet or ledger book.

Transfer the current account amounts from the financial statement for each account in the corresponding cell in column B.

Enter the closing debit amount for each account in the corresponding cell in column C. For the opening credit amount, enter that for each account in column D.

Convert to cash basis by calculating B - C + D = E for all income accounts and B + C - D = E for all expense accounts. In column E, use the formulas “= B - C + D” and "=B + C - D” with the proper cell numbers referenced. Once you do this for each account, you can convert to cash basis and have your trial balance numbers.