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At this point, the accounting cycle is complete, and the company
can begin a new cycle in the next period. In essence, the company’s
business is always in operation, while the accounting cycle
utilizes the cutoff of month-end to provide financial information
to assist and review the operations. If you like quizzes, crossword puzzles, fill-in-the-blank, matching exercise, and word scrambles to help you learn the material in this course, go to My Accounting Course for more. This website covers a variety of accounting topics including financial accounting basics, accounting principles, the accounting cycle, and financial statements, all topics introduced in the early part of this course.

  • When the post-closing trial balance is run, the zero balance temporary accounts will not appear.
  • Therefore, a post-closing trial balance will include a list of all permanent accounts that still have balances.
  • The closing entries will need to be posted to their respective accounts and then listed on the post-closing trial balance.
  • When one of these statements is inaccurate, the financial implications are great.

This ending retained earnings balance is transferred to the balance sheet. All 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. 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.

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. 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. The balances of the nominal accounts (income, expense, and withdrawal accounts) have been absorbed by the capital account – Mr. Gray, Capital. Hence, you will not see any nominal account in the post-closing trial balance.

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. The process of preparing the post-closing trial balance national debt clock 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.

6 Prepare a Trial Balance

In these columns we record all asset, liability, and equity accounts. There is a worksheet approach a company may use to make sure end-of-period adjustments translate to the correct financial statements. If you like quizzes, crossword puzzles, fill-in-the-blank,
matching exercise, and word scrambles to help you learn the
material in this course, go to My
Accounting Course for more. This website covers a variety of
accounting topics including financial accounting basics, accounting
principles, the accounting cycle, and financial statements, all
topics introduced in the early part of this course. Another way to find an error is to take the difference between the two totals and divide by nine. If the outcome of the difference is a whole number, then you may have transposed a figure.

Ten-Column Worksheets

Your stockholders, creditors, and other outside professionals will use your financial statements to evaluate your performance. If you evaluate your numbers as often as monthly, you will be able to identify your strengths and weaknesses before any outsiders see them and make any necessary changes to your plan in the following month. The purpose of closing entries is to close all temporary accounts and adjust the balances of real accounts such as owner’s capital.

Format of a Post-Closing Trial Balance

If not, you’ll have to do some research to locate and correct any errors. Additionally, a post-closing trial balance can be used to check the accuracy of financial statements, as it lists all the accounts with their updated balances after the closing entries have been made. Temporary accounts, such as revenue and expense accounts, are closed at the end of the accounting period, and their balances are transferred to permanent accounts, such as retained earnings. The statement of retained earnings always leads with beginning retained earnings.

Post-closing trial balance definition

Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee. By summing the debits together, and the credits together, we see that each reconcile to $2,120 in August. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.

Income Statement

All temporary accounts with zero balances were left out of this statement. Unlike previous trial balances, the retained earnings figure is included, which was obtained through the closing process. It provides a snapshot of the company’s financial position at the end of the accounting period after all temporary accounts have been closed and their balances have been transferred to permanent accounts. It’s important to note that the after-closing trial balance is not a financial statement but rather a report that is used to ensure the accuracy of the company’s books before preparing the financial statements. 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.

It is important to go through each step very carefully and recheck your work often to avoid mistakes early on in the process. The post-closing trial balance for Printing Plus is shown in Figure 5.8. Income Summary is then closed to the capital account as shown in the third closing entry. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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. Transferring information from T-accounts to the trial balance requires consideration of the final balance in each account. If the final balance in the ledger account (T-account) is a debit balance, you will record the total in the left column of the trial balance.

If there is a difference between the two numbers, that difference is the amount of net income, or net loss, the company has earned. Unearned revenue had a credit balance of $4,000 in the trial balance column, and a debit adjustment of $600 in the adjustment column. Remember that adding debits and credits is like adding positive and negative numbers. This means the $600 debit is subtracted from the $4,000 credit to get a credit balance of $3,400 that is translated to the adjusted trial balance column.