Post-Closing Trial Balance Example, Purpose Format, Preparation, Errors

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. Another peculiar thing about Bob’s post-closing trial balance is that normally a retained earnings account will have a credit balance, but in Bob’s books, it has a debit balance. The reason is that Bob did not make a profit in the first month of his operations.

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. Temporary accounts like revenues, expenses, and distributions have to be closed at the end of each accounting period to permanent accounts like assets, liabilities, and equity.

The income statement accounts would not be listed because they are temporary accounts whose balances have been closed to the owner’s capital account. 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. The accounts will show debits which is money coming in and credits which are charged transactions. The post-closing trial balance shows the end balance on all permanent accounts listed on the business ledger. The post-closing trial balance lists all the accounts in the general ledger that have balances, including asset, liability, equity, revenue and expense accounts.

Format of post-closing trial balance is the same as for other trial balances, i.e. non-adjusted trial balance, adjusted trial balance. The difference is the accounts, which are present and which are not in post closing trial balance, as described above. A post-closing trial balance is, as the term suggests, prepared after closing entries are recorded and posted.

As we can see from the above example, the debit and the credit columns balances are matching. 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. It ensures that at the end of an accounting period, the sum of the total debits is equal to the sum of the total credits. The post-closing trial balance gives a listing of each permanent account that a company has and its balance.

What Is the Post-Closing Trial Balance?

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 last thing that occurs at the end of the accounting cycle is to prepare a post-closing trial balance. 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. 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 following post-closing trial balance was prepared after posting the closing entries of Bold City Consulting to its general ledger and calculating new account balances.

• The bottom line on the post-closing trial balance includes the sum for both the debit and credit sides.
• Temporary accounts, like expenses and sales, will not show up on the post-closing statement.
• Through the meticulous execution of the closing process, income statement accounts are seamlessly reconciled to zero, and their respective balances get transferred to the pertinent equity accounts.
• Once prepared, companies adjust certain items to get to the post-closing trial balance.

The accounting cycle is the repetitive set of steps that must occur in every business every period in order to meet reporting requirements. In this stage, the accountant might need to know the nature of transactions so that they could classify whether it is expenses, revenues, assets, or liabilities. Recording of those transactions should follow the role of debt and credit.

Post-Closing Trial Balance: Definition, What It Is, Purposes, Accounting, Format

It is the third (and last) trial balance prepared in the accounting cycle. Nominal accounts are those that are found in the income statement, and withdrawals. The purpose of the trial balance is to check the mathematical accuracy of the accounting records and ensure that the total debits equal the total credits.

Overall, the Post-Closing Trial Balance is an essential part of the accounting process that ensures the accuracy and completeness of a company’s financial records. 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. A list of the accounts and their balances at the end of the accounting period after closing entries have been journalized and posted.

Overview: What is a post-closing trial balance?

A successful company monitors its finances and keeps track of all its credits and debits. This is essential for owners and stakeholders who need the information to make strategic business decisions. The post-closing trial balance is only one of the many sheets and statements that must be completed. An accountant usually prepares the post-closing trial balance sheets. However, in larger companies, an accountant may oversee other well-trained financial professionals who prepare these and other documents. All temporary accounts with zero balances were left out of this statement.

This is because only balance sheet accounts are have balances after closing entries have been made. Even if you’re using accounting software, running a trial balance can be important because it allows you to review account balances for accuracy. Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month. All account balances, including the balances for the Cumulative Translation Adjustment and Retained Earnings accounts, represent actual posted period end transactions in this report. And finally, in the fourth entry the drawing account is closed to the capital account.

Post Closing Trial Balance Report

But for those using spreadsheets or ledgers to manually record accounting transactions, it’s essential to make sure each temporary account balance is set to zero when the new accounting period begins. A post-closing trial balance is a list of all the balance sheet accounts and their balances after the closing entries have been made at the end of an accounting period. It is prepared after all adjusting and closing entries have been posted to the general ledger. The purpose of the post-closing trial balance is to ensure the accuracy of the accounting records for a specific accounting period, typically a month, quarter or year. It is prepared after all adjusting entries have been made and financial statements have been completed. Revenue, expenses and dividends do not show up on the post-closing trial balance because they are considered temporary accounts.

It is worth mentioning that there is one step in the process that a company may or may not include, step 10, reversing entries. Reversing entries reverse an adjusting entry made in a prior period at the start of a new period. We do not cover reversing entries in this chapter, but you might approach the subject in future accounting courses. Temporary accounts, like expenses and sales, will not show up on the post-closing statement. Since there are several types of errors that trial balances fail to uncover, each closing entry must be journalized and posted carefully. For example, an unadjusted trial balance is always run before recording any month-end adjustments.

The accounts in the ledger are now up to date and ready for the next period’s transactions. So, if you would search the answer to the question “Which types of accounts will appear in the post-closing trial balance? The answer will be, that only those accounts, which are permanent and not being closed at the end of period. The post-closing trial balance proves debits still equal credits after the closing entries have been made.

Post Closing Trial Balance Format

Permanent accounts are accounts that once opened will always be a part of a company’s chart of accounts. The post-closing trial balance will never contain temporary accounts. Temporary accounts are accounts that are not always a part of a company’s chart of accounts. The balances in temporary accounts are zeroed out at the end of each accounting period by transferring them to a permanent account. The reason for this is so that they can be used again in the next accounting period. Once the post-closing trial balance is run, and the verification is made that the sum of all the debits is equal to the sum of all the credits, then and only then is the accounting cycle complete.

A post-closing trial balance will be formatted the same as the other two types of trial balances that have already been discussed. It will have three columns (account names, debit and a credit column). Like an unadjusted or an adjusted trial balance, it will have accounts listed in order of either their account numbers or in the order they appear on the balance sheet. The order that will follow will be assets first, then liabilities and finally ending off with equity.

What is 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. 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.

Typically, the heading consists of three lines containing the company name, name of the trial balance, and date of the reporting period. Since only balance sheet accounts are listed on this trial balance, they are presented in balance sheet order starting with assets, liabilities, and ending with equity. The ninth, and typically final, step of the process is to prepare a post-closing trial balance.