The post-closing trial balance is the summary of all permanent journal accounts with non-zero balances at the end of an accounting period. First, it requires a preparer to include all account balances for the current accounting period only. Transactions post-closing trial balance definition taking place after the accounting period closing date should be carried forward to the next accounting cycle. Adjusted and post-closing trial balances are two stages of preparing a trial balance statement after the initial unadjusted entries.
This is essential for owners and stakeholders who need the information to make strategic business decisions. The post-closing trial balance is only one of the many sheets and statements that must be completed. An accountant usually prepares the post-closing trial balance sheets. However, in larger companies, an accountant may oversee other well-trained financial professionals who prepare these and other documents. Since temporary accounts are already closed at this point, the post-closing trial balance will not include income, expense, and withdrawal accounts. It will only include balance sheet accounts, a.k.a. real or permanent accounts.
Why is a post closing trial balance performed?
If there are any temporary accounts on this trial balance, you would know that there was an error in the closing process. Preparing the post-closing trial balance follows the same steps as preparing the unadjusted trial balance and adjusted trial balance. On the post-closing trial balance, only permanent account balances should appear. These amounts in post-closing T-accounts are transferred to the post-closing trial balance’s debit or credit column. When all accounts have been recorded, total each column and double-check that the columns match. The post-closing trial balance constitutes an integral component of the accounting process, meticulously compiled at the culmination of an accounting period following the recording of all closing entries.
- When all accounts have been recorded, total each column and verify the columns equal each other.
- The balances for each account are added together to show that the debit and credit balance is equal.
- In order to prepare trial balance we need a list of all general ledger accounts which are used by the business for the accounting purposes.
- It is cash and bank account receivable inventory stationary office space and expenses.
- Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month.
- The first column contains unique numerical identifiers assigned to each account in the company’s chart of accounts.
Nominal accounts are those found on the income statement, as well as withdrawals. Its objective is to verify the equality of debits and credits following the preparation of adjusting entries. The post-closing trial balance should be prepared at the end of a period.
Post-Closing Trial Balance Vs. Adjusted Trial Balance:
Simply put, a trial balance adjusted for all accounts is called an adjusted trial balance. Adjusted trial balance is an advanced form of the commonly used trial balance statement. The main use of Trial Balance is preparation of Financial Statements, i.e. this listing of all accounts with balances is used to prepare Balance Sheet and Income Statement. A trial balance is so called because it provides a test of a fundamental aspect of a set of books, but is not a full audit of them. Here are a few key differences between the adjusted trial balance and closing-trial balance.
- The debit and credit amount columns will be summed and the totals should be identical.
- At this point, the accounting cycle is complete, and the company can begin a new cycle in the next period.
- It is a list of all the balance sheet accounts that do not have a zero balance.
- Post-closing trial balance – This is prepared after closing entries are made.
- It will only include general ledger balance sheet accounts with balances other than zero.
This was the final step for trial balance preparation and next we will be covering adjusting entries which need to be done at the end of the accounting period. The last step in the accounting cycle (not counting reversing entries) is to prepare a post-closing trial balance. 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.