5 2 Prepare a Post-Closing Trial Balance Principles of Accounting, Volume 1: Financial Accounting

A post-closing trial balance is a listing of all balance sheet accounts containing non-zero balances at the end of a reporting period. The post-closing trial balance is used to verify that the total of all debit balances equals the total of all credit balances, which should net to zero. Like all trial balances, the post-closing trial balance has the job of verifying that the debit and credit totals are equal. The post-closing trial balance has one additional job that the other trial balances do not have. The post-closing trial balance is also used to double-check that the only accounts with balances after the closing entries are permanent accounts.

LINK TO LEARNING

• Notice that this trial balance looks almost exactly like the Paul’s balance sheet except in trial balance format.
• Unearned revenue had a credit balance of $4,000 in the trial balance column, and a debit adjustment of $600 in the adjustment column.
• In any case, they are an important concept and they officially represent the end of the process.
• The post-closing trial balance for Printing Plus is shown in Figure 1.32.
• A trial balance ensures the accuracy of your accounting system and is just one of the many steps in the accounting cycle.
• From this information, the company will begin constructing each of the statements, beginning with the income statement.

This balance is transferred to the Cash account in the debit column on the unadjusted trial balance. Accounts Payable ($500), Unearned Revenue ($4,000), Common Stock ($20,000) and Service Revenue ($9,500) all have credit final balances in their T-accounts. These credit balances would transfer to the credit column on the unadjusted trial balance. Now that the post closing trial balance is prepared and checked for errors, Paul can start recording any necessary reversing entries before the start of the next accounting period. Looking at the income statement columns, we see that all revenue and expense accounts are listed in either the debit or credit column.

• The trial balance information for Printing Plus is shown previously.
• To get the $10,100 credit balance in the adjusted trial balance column requires adding together both credits in the trial balance and adjustment columns (9,500 + 600).
• Transferring information from T-accounts to the trial balance requires consideration of the final balance in each account.
• A trial balance only contains ending balances of your accounting accounts, while the general ledger has detailed transactions of the accounts.
• The post closing trial balance is a list of all accounts and their balances after the closing entries have been journalized and posted to the ledger.
• All temporaryaccounts with zero balances were left out of this statement.
• If a trial balance is in balance, does this mean that all of the numbers are correct?

AccountingTools

To get the numbers in these columns, you take the number in the trial balance column and add or subtract any number found in the adjustment column. There is no adjustment in the adjustment columns, so the Cash balance from the unadjusted balance column the post-closing trial balance helps to verify that is transferred over to the adjusted trial balance columns at $24,800. Interest Receivable did not exist in the trial balance information, so the balance in the adjustment column of $140 is transferred over to the adjusted trial balance column.

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Students often ask why they need to do all of thesesteps by hand in their introductory class, particularly if they arenever going to be an accountant. If you havenever followed the full process from beginning to end, you willnever understand how one of your decisions can impact the finalnumbers that appear on your financial statements. You will notunderstand how your decisions can affect the outcome of yourcompany.

They are prepared at different stages in the accounting cycle but have the same purpose – i.e. to test the equality between debits and credits. All temporaryaccounts with zero balances were left out of this statement. Unlikeprevious trial balances, the retained earnings figure is included,which https://www.bookstime.com/articles/negative-retained-earnings was obtained through the closing process. The purpose of closing entries is to close all temporary accounts and adjust the balances of real accounts such as owner’s capital. Like all of your trial balances, the post-closing balance of debits and credits must match.

If you evaluate your numbers as often as monthly, you will be able to identify your strengths and weaknesses before any outsiders see them and make any necessary changes to your plan in the following month. There are five sets of columns, each set having a column for debit and credit, for a total of 10 columns. The five column sets are the trial balance, adjustments, adjusted trial balance, income statement, and the balance sheet.

Trial balance vs. balance sheet