What is a post-closing trial balance?

How To Prepare A Post Closing Trial Balance

In such a case, you must record such an account as nil or zero in your trial balance sheet. https://www.wave-accounting.net/ The owner’s drawing account represents money taken from the business and used by the owner.

  • The word “post” in this instance means “after.” You are preparing a trial balanceafter the closing entries are complete.
  • For the most accurate information, please ask your customer service representative.
  • Once your adjusted trial balance has been completed, you’re ready to record post-closing entries for the month.
  • In case these columns do not match, it means there exists an accounting error.
  • You probably noticed that a post closing trial balance looks a lot like a balance sheet in the format of a trial balance.

Accounting software can perform such tasks as posting the journal entries recorded, preparing trial balances, and preparing financial statements. Students How To Prepare A Post Closing Trial Balance often ask why they need to do all of these steps by hand in their introductory class, particularly if they are never going to be an accountant.

Recommended explanations on Business-studies Textbooks

Yes, to complete the accounting cycle, you’ll need to run three trial balance reports. A trial balance also comes in handy to prepare the financial statement. Now you will use a three-column trial balance sheet which should closely resemble this one. This will use three columns, including one for the names of accounts, one for debits, and one for credits. Credit BalancesCredit Balance is the capital amount that a company owes to its customers & it is reflected on the right side of the General Ledger Account. Usually, Liability accounts, Revenue accounts, Equity Accounts, Contra-Expense & Contra-Asset accounts tend to have the credit balance. 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.

  • Income Summary is then closed to the capital account as shown in the third closing entry.
  • 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.
  • In the last step of the accounting cycle, the accountant requires to prepare the post-closing trial balance.
  • It closes out balances in both expense and revenue accounts, which allows you to start tracking these totals again in the new accounting period.
  • All temporary accounts accounts begin the new accounting year with a zero balance.
  • In all three types of trial balance, the net balance is zero, i.e., all the debit balances are equal to all credit balances.

The adjusted trial balance is also used to ensure a business is practicing accounting steps according to accounting standards and accurately reporting their financial statements. When all accounts have been recorded, total each column and verify the columns equal each other. Like all trial balances, the post-closing trial balance has the job of verifying that the debit and credit totals are equal. The post-closing trial balance has one additional job that the other trial balances do not have.


The last thing that occurs at the end of the accounting cycle is to prepare a post-closing trial balance. The unadjusted trial balance shows the end balance of all primary accounts in a business ledger at the end of the accounting reporting period. The unadjusted trial balances will not show any adjustments made prior to reporting this balance.

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. Another important aspect of the post-closing trial balance is that it assists in having comparative analysis, such as the current year with the past year or peer analysis. In addition, this helps the organizations have an important understanding of the decisions they need to make regarding various metrics such as income, expenses, production costs, and so on. On the balance sheet, the credit balance in the Accumulated Depreciation does not come with the other credit balances. Instead, the credit balance in accumulated depreciation will be a deduction from the debit balance in the asset section . Both the debits and credits totals are calculated at the end, and if these are not equal, one can know that there must have been some mistake in preparing the trial balance. For example, assume a company purchases 100 units of raw material that it expects to use up during the current accounting period.


Some examples are outstanding liabilities, prepaid expenses, closing stocks, etc. 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. If you like quizzes, crossword puzzles, fill-in-the-blank, matching exercise, and word scrambles to help you learn the material in this course, go to My Accounting Course for more.

You might be asking yourself, “is the Income Summary account even necessary? ” Could we just close out revenues and expenses directly into retained earnings and not have this extra temporary account?

What types of accounts are listed on the post-closing trial balance?

A general ledger is the record-keeping system for a company’s financial data, with debit and credit account records validated by a 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. A post-closing trial balance will be formatted the same as the other two types of trial balances that have already been discussed.

Clarify all fees and contract details before signing a contract or finalizing your purchase. Each individual’s unique needs should be considered when deciding on chosen products. Rebekiah has taught college accounting and has a master’s in both management and business. Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective”), an SEC-registered investment adviser.

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