The Accounting Cycle: The Post-Closing Trial Balance Saylor Academy

Preparing the post-closing trial balance will follow the same process as the adjusted 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. A post-closing trial balance is a report that lists the balances of all the accounts in a company’s general ledger after the closing entries have been posted. The unadjusted trial balance is your first look at your debit and credit balances. If not, you’ll have to do some research to locate and correct any errors.

Once the adjustments have been posted, you would then run an adjusted trial balance. You have been exposed to the concepts of recording and journalizing transactions previously, but this explains the rest of the accounting process. The accounting cycle is the repetitive set of steps that must occur in every business https://personal-accounting.org/the-postclosing-trial-balance-3/ every period in order to meet reporting requirements. The first step is to collect all accounts under one trial balance sheet for Consulting Company Incorporated. The table below is a post-closing trial balance example showing a worked-out process that post-closing trial balance accounts should look like.

Post-closing trial balance definition

If you’re not using accounting software, consider using a trial balance worksheet, which can be used to calculate account totals. A post-closing trial balance is a report that is run to verify that all temporary accounts have been closed and their beginning balance reset to zero. At the bottom of the debit balance and credit balance columns will be a total for each. When accounting software is used, the totals should always be identical. A post-closing trial balance is a trial balance taken after the closing entries have been posted. For example, an unadjusted trial balance is always run before recording any month-end adjustments.

The permanent balance sheet accounts will appear on the post-closing trial balance with their balances. When the post-closing trial balance is run, the zero balance temporary accounts will not appear. However, all the other accounts having non-negative balances are listed, including the retained earnings account. As with the trial balance, the purpose of the post-closing trial balance is to ensure that debits equal credits. The post-closing trial balance is the report that lists all the accounts of a company and their balances after all adjustments and closing entries have been made. The creation of the post-closing trial balance is the last thing that occurs at the end of an accounting cycle.

An example of a post-closing trial balance

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. Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month. The post-closing trial balance proves debits still equal credits after the closing entries have been made. Other than the post-closing trial balance, there are two other trial balances with their own unique characteristics; unadjusted trial balance and adjusted trial balance.

This means that there is no error while posting the closing entries to their individual accounts and then listing those account balances on the post-closing trial balance. The purpose of a post-closing trial balance is to ensure that all the individual account balances match the debit and credit columns. This report is used to identify any errors that may have been made while posting the closing entries. A post-closing trial balance will be formatted the same as the other two types of trial balances that have already been discussed.

Example Post-Closing Trial Balance

Accounting software will generate a post-closing trial balance (or any other trial balance) with a click of the mouse. Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. The above-mentioned factors could be all those factors that result in the debit columns totals do not match with the credit column totals. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

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. Once all closing entries are complete, the information is transferred to the general ledger and the post-closing trial balance is complete. The next step in the accounting cycle is to prepare the reversing entries for the beginning of the next accounting period.

What Is the Post-Closing Trial Balance?

Instead, they are accounting department documents that are not distributed. 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 last thing that occurs at the end of the accounting cycle is to prepare a post-closing trial balance.
• The balances in temporary accounts are zeroed out at the end of each accounting period by transferring them to a permanent account.
• For this reason, most procedures for closing the books do not include a step for printing and reviewing the post-closing trial balance.
• So if there are already two other trial balance reports, why would you possibly need another one?
• Used to make sure that beginning balances are correct, the post-closing trial balance is also used to ensure that debits and credits remain in balance after closing entries have been completed.

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Example of a Closing Trial Balance

Do you notice that not all accounts show up on the post-closing trial balance? The answer is because only the permanent accounts of a company show up on the report. Additionally, the post-closing trial balance will have a retained earnings account which contains the balances of all temporary accounts that have been closed out.