All trial balance reports are run to make sure that debits and credits remain in balance. Preparing the post-closing trial balance will follow the same process as the adjusted inventoriable costs trial balance, but with one additional step. The closing entries will need to be posted to their respective accounts and then listed on the post-closing trial balance.

Financial statements give a glimpse into the operations of a company, and investors, lenders, owners, and others rely on the accuracy of this information when making future investing, lending, and growth decisions. When one of these statements is inaccurate, the financial implications are great. Once we are satisfied that everything is balanced, we carry the balances forward to the new blank pages of the next (now current) year’s ledger and are ready to start posting transactions. Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent. If you’re using the wrong credit or debit card, it could be costing you serious money.

The trial balance information for Printing Plus is shown previously. If we go back and look at the trial balance for Printing Plus, we see that the trial balance shows debits and credits equal to $34,000. Remember that the balance sheet represents the accounting equation, where assets equal liabilities plus stockholders’ equity. Each month, you prepare a trial balance showing your company’s position. After preparing your trial balance this month, you discover that it does not balance. The ninth, and typically final, step of the process is to prepare a post-closing trial balance.

(Figure)Identify which of the following accounts would not be listed on the company’s Post-Closing Trial Balance. (Figure)Identify whether each of the following accounts would be listed in the company’s Post-Closing Trial Balance. The post-closing trial balance for Printing Plus is shown in (Figure). If a trial balance is in balance, does this mean that all of the numbers are correct?

• Doing so ensures that the company’s financial statements accurately reflect the financial position of the company.
• The permanent balance sheet accounts will appear on the post-closing trial balance with their balances.
• As we can see from the above example, the debit and the credit columns balances are matching.

It will have three columns (account names, debit and a credit column). Like an unadjusted or an adjusted trial balance, it will have accounts listed in order of either their account numbers or in the order they appear on the balance sheet. The order that will follow will be assets first, then liabilities and finally ending off with equity. Posting accounts to the post closing trial balance follows the exact same procedures as preparing the other trial balances.

Post-Closing Trial Balance

If there are any temporary accounts on this trial balance, you would know that there was an error in the closing process. Another thing to observe is that as expected we do not see any temporary account balances in the post-closing trial balance. All the revenue and expense accounts have successfully been closed out into an income summary account and then the income summary account balance has also been transferred to retained earnings account.

• You will not see a similarity between the 10-column worksheet and the balance sheet, because the 10-column worksheet is categorizing all accounts by the type of balance they have, debit or credit.
• A post-closing trial balance is a financial report prepared at the end of an accounting period to ensure that all temporary accounts have been closed and the company’s books are balanced.
• Only permanent account balances should appear on the post-closing trial balance.
• The post-closing trial balance can only be prepared after each closing entry has been posted to the General Ledger.
• The next step is to record information in the adjusted trial balance columns.

What do you do if you have tried both methods and neither has worked? Unfortunately, you will have to go back through one step at a time until you find the error. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers.

The Importance of Understanding How to Complete the Accounting

They will work in a variety of jobs
in the business field, including managers, sales, and finance. 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.

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. 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. You will not understand how your decisions can affect the outcome of your company.

Unlike an adjusted trial balance, which includes all accounts with up-to-date balances after adjusting entries, a post-closing trial balance only includes accounts with balances after the closing entries. An adjusted trial balance is prepared after adjusting entries are made at the end of an accounting period. Adjusting entries are made to record any transactions that occurred but were not recorded during the period or correct any accounting records errors. Firstly, it ensures that the company’s books are balanced and all temporary accounts have been closed, providing an accurate financial position. A post-closing trial balance is a financial report that lists all the accounts with their updated balances after the closing entries have been made at the end of an accounting period. All temporary
accounts with zero balances were left out of this statement.

Module 4: Completing the Accounting Cycle

In the first and second closing entries, the balances of Service Revenue and the various expense accounts were actually transferred to Income Summary, which is a temporary account. The Income Summary account would have a credit balance of 1,060 (9,850 credit in the first entry and 8,790 debit in the second). Nominal accounts are those that are found in the income statement, and withdrawals. It’s important to note that a post-closing trial balance is not the same as a balance sheet, which is a financial statement that summarizes a company’s assets, liabilities, and equity at a specific time. In Completing the Accounting Cycle, we continue our discussion of the accounting cycle, completing the last steps of journalizing and posting closing entries and preparing a post-closing trial balance. Next will be a listing of all of the general ledger balance sheet accounts (except those with $0.00 balances) along with each account’s balance appearing in the appropriate debit or credit column.

Definition of Post-closing Trial Balance

At this point, the balance of the capital account would be 7,260 (13,200 credit balance, plus 1,060 credited in the third closing entry, and minus 7,000 debited in the fourth entry). Before that, it had a credit balance of 9,850 as seen in the adjusted trial balance above. While it differs from an adjusted trial balance in purpose and content, both serve as crucial tools to ensure the accuracy of financial records and statements. Next, the accountant closes the temporary accounts by transferring their balances to the permanent accounts, such as retained earnings.

What is the purpose of a post-closing trial balance?

The post-closing trial balance is also
used to double-check that the only accounts with balances after the
closing entries are permanent accounts. If there are any temporary
accounts on this trial balance, you would know that there was an
error in the closing process. As with the unadjusted and adjusted trial balances, both the debit and credit columns are calculated at the bottom of a trial balance.

You then add together the $5,575 and $4,665 to get a total of $10,240. If you review the income statement, you see that net income is in fact $4,665. Accounting software requires that all journal entries balance before it allows them to be posted to the general ledger, so it is essentially impossible to have an unbalanced trial balance.