Finally, when the new accounting period is about to begin, you would run the post-closing trial balance, which reflects your totals going forward into the new accounting period. All trial balance reports are run to make sure that debits and credits remain in balance. Unlike an adjusted trial balance, which includes all accounts with up-to-date balances after adjusting entries, a post-closing trial balance only includes accounts with balances after the closing entries.
- Once the adjustments have been posted, you would then run an adjusted trial balance.
- Many students who enroll in an introductory accounting course do not plan to become accountants.
- This is the initial version that an accountant uses when preparing to close the books at the end of the month.
- In other words, the post closing trial balance is a list of accounts or permanent accounts that still have balances after the closing entries have been made.
- If the two balances are not equal, there is a mistake in at least one of the columns.
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 post-closing trial balance is also used to double-check that the only accounts with balances after the closing entries are permanent accounts.
What is the purpose of a post-closing trial balance?
This makes sure that your beginning balances for the next accounting cycle are accurate. It’s important to note that a post-closing trial balance is not the same as a balance sheet, which is a financial statement that summarizes a company’s assets, liabilities, and equity at a specific time. Next, the accountant closes the temporary accounts by transferring their balances to the permanent accounts, such as retained earnings. This report provides a snapshot of the company’s financial position after the closing entries. Note that for this step, we are considering our trial balance to be unadjusted. The unadjusted trial balance in this section includes accounts before they have been adjusted.
- Now that the post closing trial balance is prepared and checked for errors, Paul can start recording any necessary reversing entries before the start of the next accounting period.
- After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career.
- After preparing your trial balance this month, you discover that it does not balance.
- While a post-closing trial balance and an adjusted trial balance both serve as important financial reports for a company, their purpose and content differ.
- Remember that closing entries are only used in systems using actual bound books made of paper.
After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career. This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Unfortunately, you will have to go back through one step at a time until you find the error. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License .
Post Closing Trial Balance
As with all financial reports, trial balances are always prepared with a heading. Typically, the heading consists of three lines containing the company name, name of the trial balance, and date of the reporting period. Even if you’re using accounting software, running the post-closing trial balance helps to verify that a trial balance can be important because it allows you to review account balances for accuracy. The trial balance worksheet contains columns for both income statement and balance sheet entries, allowing you to easily combine multiple entries into a single amount.
The word “post” in this instance means “after.” You are preparing a trial balance after the closing entries are complete. In other words, a post-closing trial balance only includes permanent accounts, such as assets, liabilities, and equity accounts, which are not closed at the end of the accounting period. As a result, temporary accounts do not have balances at the end of the accounting period and are not included in a post-closing trial balance. To prepare a post-closing trial balance, the accountant or bookkeeper starts with a trial balance that lists all accounts with their debit or credit balances.
