Running 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. A trial balance is a report that lists the ending account balances in your general ledger. A repository for all of your accounts, every transaction recorded either in your accounting software or in your manual ledgers directly impacts the general ledger. A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed.
The primary purpose of preparing this post-closing trial balance is to ensure that all accounts are balanced and ready for recording the next period of financial transactions. Since there are several types of errors that trial balances fail to uncover, each closing entry must be journalized and posted carefully. The adjusted trial balance for ABC Business is shown below. While all of the adjusting entries a post closing trial balance is a list of 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. 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. All of the above tests whether all debits equal all credits.
How to Close Accounting Books
The main difference between them is the timing of when they are prepared. These journal entries are then posted into individual accounting ledgers in general ledgers. If the transaction affects the increase of assets, then it should be debited. If they are decreasing, then it should be recorded in credit.
Preparing a trial balance for a company serves to detect any mathematical errors that have occurred in the double entry accounting system. If the total debits equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers. However, this does not mean that there are no errors in a company’s accounting system. For example, transactions classified improperly or those simply missing from the system still could be material accounting errors that would not be detected by the trial balance procedure.
An example of a post-closing trial balance
The process of preparing the post-closing trial balance is the same as you have done when preparing the unadjusted trial balance and adjusted trial balance. Only permanent account balances should appear on the post-closing trial balance. These balances in post-closing T-accounts are transferred over to either the debit or credit column on the post-closing trial balance.
To ensure that the accounting records are in balance and that the total debits equal the total credits. It is important to note that the post-closing trial balance contains only balance items accounts. Income statement items are temporary accounts and are not included in the post-closing trial balance. Overall, the post-closing trial balance is an essential part of the accounting process that ensures the accuracy and completeness of a company’s financial records. The ninth, and typically final, step of the process is to prepare a post-closing trial balance. The word “post” in this instance means “after.” You are preparing a trial balance after the closing entries are complete.