Check these areas to make sure you’re including all the adjusting entries you need to for the accounting period before closing the accounting period. Once you’ve included your adjusted entries and run the adjusted trial balance, you’re ready to run the post-closing trial balance. A post-closing trial balance is a listing of all balance sheet accounts containing non-zero balances at the end of a reporting period. 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. As a result, temporary accounts do not have balances at the end of the accounting period and are not included in a post-closing trial balance. A post-closing trial balance ensures that all temporary accounts have been closed and that the company’s books are balanced.

• The accumulated depreciation account is a debit account that reflects a negative balance of the depreciation accumulation of all fixed assets.
• At the end of the cycle, an unadjusted trial balance and adjusted trial balance are created, before closing entries are posted and a post closing trial balance is prepared.
• This makes sense because all of the income statement accounts have been closed and no longer have a current balance.
• An accountant prepares this trial balance after passing the adjusting entries.

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. Like more trial balances, the debit and credit columns are totaled at the bottom to ensure theaccounting equationis in balance. DebitCreditIncome Summary (37,100 – 28,010)9,090Retained Earnings9,090If expenses were greater than revenue, we would have net loss. An exhaustive list of the balance sheet accounts with a non-zero balance at the end of your reporting period is contained in a post-closing trial balance.

The post closing trial balance lists all remaining accounts with balances after the closing entries have been posted to ensure that no temporary accounts still exist. We can observe the difference between the adjusted trial balance and the post-closing trial balance. All the temporary accounts like revenue and expense accounts have been closed out into the retained earnings account via the income summary account (as previously explained). The post-closing trial balance proves debits still equal credits after the closing entries have been made.

Remember, all revenue and expense accounts of your trial balance are showcased in the trading and P&L accounts. Whereas, all your assets, liabilities, and the capital accounts appearing in your trial balance are showcased in your company’s balance sheet. That is, you do not have to go through the hassle of checking each and every ledger account.

How To Prepare A Post Closing Trial Balance

Once all transactions have been recorded and posted to the ledger, you will prepare the unadjusted trial balance as the first trial balance for the accounting period. Prior to making any month-end adjustments, its main objective is to determine whether the company’s debits and credits are equal. You might need to add some missed debits or credits, or you might find that you did something else wrong. The post-closing trial balance, the last step in the accounting cycle, helps prepare your general ledger for the new accounting period.

• Now that your adjusting entries have been completed and your adjusted trial balance debits and credits balance, you’re ready to make some closing entries in preparation for completing the post-closing trial balance.
• It is important to know the nuances of the accounting cycle, to understand what a trial balance is.The post-closing trial balance is the final report of the accounting cycle.
• It means the total of all credit and debit ledger accounts should always be equal.
• The workflow of an adjusted trial balance starts with recording journal entries.
• Thus, there is no need for you to go through each of the ledger accounts while preparing financial statements.

Also, as you can note there are no temporary ledger accounts and the sum of all credits and debits is equal. The post-closing trial balance accounts are then taken forward to the relevant financial statements. Both types of statements are non-formal and offer valuable information for the preparation of financial statements.

What do closing entries do?

Both serve the accountants to prepare the pre-requisite for the preparation of financial statements. The post-closing trial balance summary only considers permanent ledger accounts. So, first of all, it differentiates between the temporary and permanent ledger accounts.

Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month. Here are a few similarities between the adjusted and post-closing trial balances. Temporary ledger accounts are recurring accounts that start and end with zero balances what is a financial statement definition and guide 2023 for every accounting cycle. Let us discuss what are adjusted and post-closing trial balances and their key differences. It can easily been see that the post-closing trial balance is containing only Balance sheet items which are to carry forward for to next accounting period.

Overview: What is a post-closing trial balance?

Thus, the adjusted trial balance is a process to prepare accurate ledger account balances for an accounting cycle. The post-closing trial balance will include assets, liabilities, and equity accounts that are permanent and have a non-zero balance at the closing date of an accounting period. The remaining balance of all temporary accounts is carried forward to the next accounting period.

An example of a post-closing trial balance

By summing the debits together, and the credits together, we see that each reconcile to $2,120 in August. Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. 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. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions.

This one contains entries pertaining to account reconciliation adjustments, depreciation entries, and charges of prepaid expenses to expense. The accountant may prepare a series of adjusted trial balances, making a number of adjusting entries before closing the books for the month. This version contains the ending balances of all accounts in the general ledger, before any adjustments have been made to them with adjusting entries. This is the initial version that an accountant uses when preparing to close the books at the end of the month.

What happens after the post-closing trial balance?

So this is obvious that data which are recorded in the post closing trial balance is taken from the Balance Sheet. This accounts list is identical to the accounts presented on the balance sheet. This makes sense because all of the income statement accounts have been closed and no longer have a current balance.