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Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making. Makes it mandatory that all journal entries must be balanced before allowing them to be posted to the general ledger. Real AccountsReal accounts do not close their balances at the end of the financial year but retain and carry forward their closing balance from one accounting year to another. In other words, the closing balance of these accounts in one accounting year becomes the opening balance of the succeeding accounting year. As you can see, the accountant or bookkeeper first needs to analyze the business transactions and then make the journal entries. You can also think of assets and liabilities in terms of current and long-term.
The balance in Income Summary is the same figure as what is reported on Printing Plus’s Income Statement. At the end of every accounting cycle, temporary accounts will be set to a zero balance through closing entries, and after this is done, a post closing trial balance will be created. A post closing trial balance is the third trial balance in the accounting cycle and lists all of a company’s accounts that have remaining balances after a company’s closing entries have been made. The last thing that occurs at the end of the accounting cycle is to prepare a post-closing trial balance. 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. 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. Preparing the post-closing trial balance will follow the same process as the adjusted trial balance, but with one additional step.
What Is a Post Closing Trial Balance?
State whether each account is a permanent or temporary account. It is the end of the year, December 31, 2018, and you are reviewing your financials for the entire post closing trial balance year. You see that you earned $120,000 this year in revenue and had expenses for rent, electricity, cable, internet, gas, and food that totaled $70,000.
- That way, you are prepared to enter accurate information into the financial statements.
- The last step in the accounting cycle is to prepare a post-closing trial balance.
- Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making.
- The unadjusted trial balance is prepared before adjusting journal entries are completed.
While all of the adjusting entries for ABC Business are reflected in the adjusted trial balance, we still need to do some closing entries before running the post-closing trial balance. If you’re not using accounting software, consider using a trial balance worksheet, which can be used to calculate account totals. That makes it much easier to create accurate financial statements. At the end of the period, all of the account ledgers need to close and then move to the unadjusted trial balance. This is to make sure that the entries that make to the account ledgers are correctly recorded.
An example of a post-closing trial balance
The next step in the accounting cycle is to prepare the reversing entries for the beginning of the next accounting period. Totals of both the debit and credit columns will be calculated https://www.bookstime.com/ at the bottom end of the post-closing trial balance. These columns should balance, otherwise, it would likely mean that there has been an error in the posting of the adjusting entries.
