Preparation of adjusted trial balance
Preparation of adjusted trial balance is prepared by creating a series of journal entries that are designed to account for any transactions that have not yet been completed. These items include payroll expenses, prepaid expenses, and depreciation expenses. Preparing an adjusted trial balance is the sixth step in the accounting cycle. An adjusted trial balance is prepared by creating a series of journal entries that are designed to account for any transactions that have not yet been completed.
These items include payroll expenses, prepaid expenses, and depreciation expenses. Here are the steps used to prepare an adjusted trial balance:
- Run an unadjusted trial balance. This provides an initial summary of your general ledger accounts prior to entering any adjusting entries.
- Make any adjusting entries that are needed. Adjusting entries can include adjustments for prepayments, interest and depreciation expenses, and payroll accruals.
- Run the adjusted trial balance. You can ensure that the entries have posted correctly by comparing the initial trial balance totals with the adjusted trial balance totals.
Example of an adjusted trial balance
To understand what an adjusted trial balance is, we first have to view an unadjusted trial balance as well as the necessary journal entries to complete in order to prepare an adjusted trial balance.
Step 1: Run an unadjusted trial balance
Step 2: Enter adjusting journal entries
Step 3: Run an adjusted trial balance
The adjusted trial balance is key to accurate financial statements
Before posting any closing entries, you want to make sure that your trial balance reflects the most accurate information possible.
Both the unadjusted trial balance and the adjusted trial balance play an important role in ensuring that all of your accounts are in balance and financial statements will reflect the most accurate totals.
What is the purpose of an adjusted trial balance?
An adjusted trial balance provides you with the summary totals of all of your general ledger accounts after adjusting entries have been made.
What relation does an adjusted trial balance have to the general ledger?
Both the unadjusted and the adjusted trial balance are listings of the ending balances of all of your general ledger accounts.
What entries are typically made to the adjusted trial balance?
Adjusting entries typically include payroll accruals, prepayment adjustments, and depreciation expenses that have not yet been recorded.
You may also like Effects of failing to prepare adjusting entries
Leave a Reply