Post-Closing Trial Balance Example, Purpose Format, Preparation, Errors

The other type of trial balance is adjusted trial balance and it shows the closing balances of accounts after adjustments have been made. Post-closing entries may need to be made if errors were found between credit and debit transactions in the unadjusted trial balance sheet.

A trial balance can take different forms, depending on when the trial balance occurs within an accounting cycle. Each trial balance contains different ledger accounts based on the account-related post closing trial balance accounting entries-regular, adjusting or closing entries. Some merchandising accounts may have been adjusted and closed, and thus, may not appear on the post-closing trial balance.

How to Close an Expense Account

The reason for this is so that they can be used again in the next accounting period. Once the post-closing trial balance is run, and the verification is made that the sum of all the debits is equal to the sum of all the credits, then and only then is the accounting cycle complete. In the accounting cycle, there are two other trial balances that are prepared.

The post-closing trial balance does not include the closed merchandising accounts of cost of goods sold and supplies consumed, and consists only of real accounts of asset, liability and equity. Merchandising accounts of inventory and other supplies are asset accounts and will appear in the post-closing trial balance, provided that there is still a balance in those accounts. Accounts in the post-closing trial balance are the basis for compiling the balance sheet. To know how much your revenue and expenses were for a specific period, you need to start the period with a zero balance in your revenue and expense accounts. The post-closing trial balance helps you verify that these accounts have zero balances. Since most trial balances do not list accounts with zero balances, the post-closing trial balance will include only general ledger balance sheet accounts having balances other than $0.00. The debit and credit amount columns will be summed and the totals should be identical.

COMPANY

That way, you are prepared to enter accurate information into the financial statements. This accounts list is identical to the accounts presented on the balance sheet. This makes sense because all of the income statement accounts have been closed and no longer have a current balance. Temporary accounts like revenues, expenses, and distributions have to be closed at the end of each accounting period to permanent accounts like assets, liabilities, and equity. The post closing trial balance lists all remaining accounts with balances after the closing entries have been posted to ensure that no temporary accounts still exist.

All trial balance reports are run to make sure that debits and credits remain in balance. The ABC business accounting team is creating a post-closing trial balance. The team is requesting revenue and expense account balances to be added to the final post-closing trial balance.

YEAR-END REPORTS NO. 7 AND 8, PRE AND POST CLOSING TRIAL BALANCES – 7962

The process of preparing the post-closing trial balance is the same as you have done when preparing the unadjusted trial balance and adjusted trial balance. Only permanent account balances https://www.bookstime.com/ should appear on the post-closing trial balance. These balances in post-closing T-accounts are transferred over to either the debit or credit column on the post-closing trial balance.

A company can follow a step-by-step approach to prepare adjusted trial balance statements. After the post closing trial balance is finished and checked for any mistakes, any reversing entries that are needed can be made before the next accounting period begins. Another peculiar thing about Bob’s post-closing trial balance is that normally a retained earnings account will have a credit balance, but in Bob’s books, it has a debit balance.

Does a Sales Discount Go on an Unadjusted Trial Balance?

Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month. Adjusted trial balance removes errors and makes adjusting entries for deferrals, accruals, prepaid transactions, and other adjustments. Both summaries include accounting balances for one accounting cycle and carry forward the closing balances to the next one. Temporary ledger accounts are recurring accounts that start and end with zero balances for every accounting cycle. The foremost and important factor for adjusted trial balance is to ensure all recorded journal entries are accurately recorded.

• However, you can choose to prepare a trial balance at the end of a month, quarter, half-year, or a year.
• The articles and research support materials available on this site are educational and are not intended to be investment or tax advice.
• This will use three columns, including one for the names of accounts, one for debits, and one for credits.
• The reason for this is so that they can be used again in the next accounting period.
• Accounting software can perform such tasks as posting the journal entries recorded, preparing trial balances, and preparing financial statements.