After the closing entries are journalized and posted, only permanent, balance sheet accounts remain open. A post‐closing trial balance is prepared to check the clerical accuracy of the closing entries and to prove that the accounting equation is in balance before the next accounting period begins. Show
The Greener Landscape Group Post-Closing Trial Balance April 30, 20X2 Since there are several types of errors that trial balances fail to uncover, each closing entry must be journalized and posted carefully. Definition of Balance SheetThe total amounts on a balance sheet show that a company's assets = liabilities + owner's (stockholders') equity. Definition of Post-Closing Trial BalanceThe total amounts on a post-closing trial balance show that the accounts having debit balances = the accounts having credit balances. Example of Balance Sheet TotalsAssets normally have debit balances. However, there are a few asset accounts that are expected to have credit balances. (These are known as contra asset accounts.) One example is Accumulated Depreciation. Let's assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets reported on the balance sheet will report the net amount of $70,000. Example of Post-closing Trial Balance TotalsUsing the amounts above, the company's post-closing trial balance will report $200,000 in the debit column and $130,000 in the credit column. This will cause a difference of $130,000 between the balance sheet totals and the post-closing trial balance totals. Other examples of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include:
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Intermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions Accounting23rd EditionCarl S Warren, James M Reeve, Jonathan E. Duchac 2,210 solutions Image source: Getty Images Preparing a post-closing trial balance is an important step in the accounting cycle. Completed after closing entries, the post-closing trial balance prepares your accounts for the next period. A post-closing trial balance is the final trial balance prepared before the new accounting period begins. Used to make sure that beginning balances are correct, the post-closing trial balance is also used to ensure that debits and credits remain in balance after closing entries have been completed. Overview: What is a post-closing trial balance?A post-closing trial balance is a report that is run to verify that all temporary accounts have been closed and their beginning balance reset to zero. If you’re using an accounting software application, much of this work is completed automatically, but if you’re using manual ledgers or spreadsheets to record accounting transactions, you’ll need to make sure that your temporary account balances are reset to zero to begin the new accounting period. If you’re not using accounting software, consider using a trial balance worksheet, which can be used to calculate account totals. That makes it much easier to create accurate financial statements. If you’re using manual ledgers for accounting, a trial balance worksheet can be helpful. Image source: Author The trial balance worksheet contains columns for both income statement and balance sheet entries, allowing you to easily combine multiple entries into a single amount. This makes sure that your beginning balances for the next accounting cycle are accurate. Types of trial balanceThere are three main types of trial balance reports that you can run, with each trial balance run during a specific part of the accounting cycle. For example, an unadjusted trial balance is always run before recording any month-end adjustments. Once the adjustments have been posted, you would then run an adjusted trial balance. 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. 1. Unadjusted trial balanceThe unadjusted trial balance is the first trial balance that you’ll prepare, and it should be completed after all entries for the accounting period have been completed. The unadjusted trial balance is your first look at your debit and credit balances. Ideally, your debits and credits should match. If not, you’ll have to do some research to locate and correct any errors. 2. Adjusted trial balanceAll businesses have adjusting entries that they’ll need to make before closing the accounting period. These adjusting entries include depreciation expenses, prepaid expenses, insurance expenses, and accumulated depreciation. Once your adjusting entries have been made, you’re ready to run your adjusted trial balance. 3. Post-closing trial balanceOnce your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month. 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. An example of a post-closing trial balanceBefore you can run a post-closing trial balance, you’ll have to make sure that all of your adjusting journal entries have been entered. The adjusted trial balance for ABC Business is shown below. While all of the adjusting entries for ABC Business are reflected in the adjusted trial balance, we still need to do some closing entries before running the post-closing trial balance. ABC Business Adjusted Trial Balance August 31, 2020
Now that your adjusting entries have been completed and your adjusted trial balance debits and credits balance, you’re ready to make some closing entries in preparation for completing the post-closing trial balance. Closing temporary accounts is an important step in the accounting cycle, and running the post-closing trial balance helps to make sure that the process has been completed accurately.
Now that your income and expenses have been posted to your income summary account, you’re ready to prepare your post-closing trial balance dated 9-1-2020. ABC Business Adjusted Trial Balance August 31, 2020
Because you made closing entries for revenue and expenses, those accounts do not appear on the post-closing trial balance. You’ll also notice that the owner’s capital account has a new balance based on the closing entries you made earlier. FAQs
The post-closing trial balance is the final step in the accounting cycleRunning a trial balance is a must for anyone manually recording financial transactions since it helps to make sure that debits and credits are in balance -- which is the core principle of double-entry accounting. The post-closing trial balance, the last step in the accounting cycle, helps prepare your general ledger for the new accounting period. It closes out balances in both expense and revenue accounts, which allows you to start tracking these totals again in the new accounting period. Even if you’re using accounting software, running a trial balance can be important because it allows you to review account balances for accuracy. Make sure you don’t overlook this important step. Expert-picked business credit cards with rich rewards and perksCash back, travel rewards, 0% intro APR financing: all of these can be great credit card perks for business owners. But how do you find the right business credit card for you? There are tons of offers on the market today, and sifting through them to find the right one can be a big hassle. So we've done the hard work for you. Get started with one of our top business credit card picks of 2022 today. Does Post Closing trial balance have to balance?Like all of your trial balances, the post-closing balance of debits and credits must match.
What account appears on the Post Closing trial balance quizlet?The accounts that appear on the post-closing trial balance are (A) assets, liabilities, and owner's capital.
Why is a Post Closing trial balance performed?Post Closing Trial Balance is the list of all the balance sheet items and their balances, excluding the zero balance accounts. It is used for verification that temporary accounts are properly closed and that the total balances of all the debit accounts and all the credit accounts are equal.
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