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. For example, let’s assume the following is the trial balance for Printing Plus.
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. 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. If you’re not using accounting software, consider using a trial balance worksheet, which can be used to calculate account totals. While a post-closing trial balance and an adjusted trial balance both serve as important financial reports for a company, their purpose and content differ.
v2 Principles of Accounting — Financial Accounting
After the unadjusted trial balance is prepared and it appears error-free, a company might look at its financial statements to get an idea of the company’s position before adjustments are made to certain accounts. A more complete picture of company position develops after adjustments occur, and an adjusted trial balance has been prepared. These next steps in the accounting cycle are covered in The Adjustment Process.
- 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.
- These next steps in the accounting cycle are covered in The Adjustment Process.
- The unadjusted trial balance is your first look at your debit and credit balances.
- It is very important to understand
that no matter what your position, if you work in business you need
to be able to read financial statements, interpret them, and know
how to use that information to better your business.
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. By summing the debits together, and the credits together, we see that each reconcile to $2,120 in August. My Accounting the post-closing trial balance helps to verify that 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. Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching.
What is the Post Closing Trial Balance?
In any case, they are an important concept and they officially represent the end of the process. If a trial balance is in balance, does this mean that all of the numbers are correct? It is important to go through each step very carefully and recheck your work often to avoid mistakes early on in the process. 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. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
- The post-closing trial balance proves debits still equal credits after the closing entries have been made.
- Another way to find an error is to take the difference between the two totals and divide by nine.
- The purpose of closing entries is to transfer the balances of the temporary accounts (expenses, revenues, gains, etc.) to the retained earnings account.
- The post-closing trial balance is also
used to double-check that the only accounts with balances after the
closing entries are permanent accounts. - The post-closing trial balance is used to verify that the total of all debit balances equals the total of all credit balances, which should net to zero.
- Posting accounts to the post closing trial balance follows the exact same procedures as preparing the other trial balances.
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. It is prepared after all of that period’s business transactions have been posted to the General Ledger via journal entries. The post-closing trial balance can only be prepared after each closing entry has been posted to the General Ledger. The purpose of closing entries is to transfer the balances of the temporary accounts (expenses, revenues, gains, etc.) to the retained earnings account. After the closing entries are posted, these temporary accounts will have a zero balance.