However, all the other accounts having non-negative balances are listed including the retained earnings account. The post-closing trial balance lists all the accounts in the general ledger that have balances, including asset, liability, equity, revenue, and expense accounts. Preparing the post closing trial balance is one of the last steps in the accounting cycle.

How does the post-closing trial balance relate to the balance sheet?

After posting the above entries, all the nominal accounts would zero-out, hence the term “closing entries”. As you can see, the accountant or bookkeeper first needs to analyze the business transactions and then make the journal entries. 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. The above-mentioned factors could be all those factors that result in the debit columns totals do not match with the credit column totals.

• It presents a list of accounts and balances after closing entries have been written and posted in the ledger.
• These accounts carry their balances into the next accounting period and are used to prepare the financial statements.
• The balances of the nominal accounts (income, expense, and withdrawal accounts) have been absorbed by the capital account – Mr. Gray, Capital.
• However, closing out the wrong accounts or making other small mistakes or omissions can snowball into serious problems in the following period.
• Once the adjustments are completed, we then get the adjusted trial balance.

How Do You Prepare the After-closing Trial Balance?

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. If they do not match, it indicates that there is an error in the accounting records that needs to be corrected. They are an unadjusted trial balance, adjusted trial balance, and 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. Once all adjusting entries have been recorded, the result is the adjusted trial balance.

What are the purpose of the post-closing trial balance?

As part of the closing process, the balances in these movements to the retained earnings account. Post-Closing Trial Balance is an accuracy check to verify that all debit balances equal all credit balances, and hence net balance should be zero. It presents a list of accounts and balances after closing entries have been written and posted in the ledger. Preparing the post-closing trial balance will follow the same process that took to create the unadjusted or adjusted trial balance. Each account balance is transferred from their ledger accounts to the post-closing trial balance.

Impact on Financial Statements

• After posting the above entries, all the nominal accounts would zero-out, hence the term “closing entries”.
• A list of all accounts and their balances after adjustments have been made but before closing entries.
• As we can see from the above example, the debit and the credit columns balances are matching.
• The other two are the unadjusted and adjusted trial balances, both of which are prepared before the temporary accounts are closed out.
• So there’s those two crucial entries for retained earnings, and that takes us back to that general account flow.
• A post-closing trial balance is a list of balances of ledger accounts prepared after closing entries have been passed and posted to the ledger accounts.

Many students who enroll in an introductory accounting course donot plan to become accountants. They will work in a variety of jobsin the business field, including managers, post closing trial balance sales, and finance. In areal company, most of the mundane work is done by computers.Accounting software can perform such tasks as posting the journalentries recorded, preparing trial balances, and preparing financialstatements.

Post Closing Trial Balance

All the revenue and expense accounts have successfully been closed out into an income summary account and then the income summary account balance has also been transferred to retained earnings account. The retained earnings account is a new permanent account listed on this trial balance which you won’t find in the trial balances (adjusted and unadjusted) that preceded the post-closing trial balance. Before preparing a post-closing trial balance, it’s important to ensure all the adjusting journal entries have been entered. To prepare a post-closing trial balance, each account balance is transferred from the ledger accounts.

Financial Accounting

If the debits and credits do not match, further investigation is required to identify and resolve the imbalance. This process resets the temporary accounts to zero and prepares them for the next accounting period. The post-closing trial balance closely resembles the balance sheet because it includes only permanent accounts, which are the same accounts listed on the balance sheet.