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

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• Its purpose is to test the equality between debits and credits after the recording phase.
• All temporary
  accounts with zero balances were left out of this statement.
• Now that we have completed the accounting cycle, let’s take a look at another way the adjusted trial balance assists users of information with financial decision-making.
• Preparing a trial balance is an important step in the accounting process, because it helps identify any computational errors throughout the first three steps in the cycle.

The difference between the unadjusted trial balance and the adjusted trial balance is the adjusting entries that are required to align the company accounts for the matching principle. Preparing an unadjusted trial balance is the fourth step in the accounting cycle. A trial balance is a list of all accounts in the general ledger that have nonzero balances. A trial balance is an important step in the accounting process, because it helps identify any computational errors throughout the first three steps in the cycle.

What is the difference between a trial balance and a post-closing trial balance?

Doing so ensures that the company’s financial statements accurately reflect the financial position of the company. If you like quizzes, crossword puzzles, fill-in-the-blank,
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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. In other words, the post closing trial balance is a list of accounts or permanent accounts that still have balances after the closing entries have been made. Finally, when the new accounting period is about to begin, you would run the post-closing trial balance, which reflects your totals going forward into the new accounting period. All trial balance reports are run to make sure that debits and credits remain in balance. Additionally, the post-closing trial balance will have a retained earnings account which contains the balances of all temporary accounts that have been closed out.

2 Prepare a Post-Closing Trial Balance

Therefore, there are fewer chances of errors and omissions in the post-closing process. The remaining balance of all temporary accounts is carried forward to the next accounting period. Adjusted and post-closing trial balances are two stages of preparing a trial balance statement after the initial unadjusted entries.

Financial and Managerial Accounting

If there are any temporary
accounts on this trial balance, you would know that there was an
error in the closing process. After the unadjusted trial balance is prepared and it appears error-free, a company might look at its financial statements to get an idea of the company’s position before adjustments are made to certain accounts. A more complete picture of company position develops after adjustments occur, and an adjusted trial balance has been prepared.

Adjusted trial balance

And just like any other trial balance, total debits and total credits should be equal. Here are a few similarities between the adjusted and post-closing trial balances. The process of the post-closing trial balance is similar to the adjusted trial balance with a few changes. The above-mentioned factors could be all those factors that result in the debit columns totals do not match with the credit column totals. All the financial transactions that occurred during the period need to be recorded in the account ledger-based nature and by respecting accounting principles as well as accounting standards that the entity is using. As you can see, the accountant or bookkeeper first needs to analyze the business transactions and then make the journal entries.

Common Errors

Accounting software can perform such tasks as posting the journal
entries recorded, preparing trial balances, and preparing financial
statements. Students often ask why they need to do all of these
steps by hand in their introductory class, particularly if they are
never going to be an accountant. It is very important to understand
that no matter what your position, if you work in business you need
to be able to read financial statements, interpret them, and know
how to use that information to better your business. If you have
never followed the full process from beginning to end, you will
never understand how one of your decisions can impact the final
numbers that appear on your financial statements.

What is a Post-closing Trial Balance?

These next steps in the accounting cycle are covered in The Adjustment Process. A post-closing trial balance is a list of balances of ledger accounts prepared after closing entries have been passed and posted to the ledger accounts. However, all the other accounts having non-negative balances are listed including the retained earnings account. A post-closing trial balance will be formatted the same as the other two types of trial balances that have already been discussed.