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Post-Closing Trial Balance Entries & Examples What is a Post-Closing Trial Balance? Video & Lesson Transcript

post closing trial balance definition

Furthermore, some accounts may have been used to record multiple business transactions. As a result, the ending balance of each ledger account as shown in the trial balance worksheet is the sum of all debits and credits that have been entered to that account based on all related business transactions. 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.

  • By following these steps, you can create an accurate trial balance that will serve as a starting point for reconciling your accounts and ensuring the accuracy of your financial statements.
  • You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.
  • The last step in the accounting cycle is to prepare a post-closing trial balance.
  • He is a certified public accountant, graduated summa cum laude with a Bachelor of Arts in business administration and has been writing since 1998.
  • A trial balance is a worksheet with two columns, one for debits and one for credits, that ensures a company’s bookkeeping is mathematically correct.

A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed. We can say that a trial balance not only provides evidence of the arithmetical accuracy of the ledger but that it also serves as a summary of all transactions made since the end of the previous accounting period. If you check the above trial balance again, you’ll realize that this list of balances is also a summary of all transactions made during the accounting period. Even experienced bookkeepers normally have to find trial balance errors.

What is the main purpose of trial balance?

If the total debits equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers. However, this does not mean that there are no errors in a company’s accounting system. For example, transactions classified improperly or those simply missing from the system still could be material accounting errors post closing trial balance definition that would not be detected by the trial balance procedure. In the accounting cycle, there are two other trial balances that are prepared. This report lists all the accounts that a company has and their balances. The next one is called the adjusted trial balance and is a list of all the company accounts and their balances after any adjustments have been made.

DebitsDebit represents either an increase in a company’s expenses or a decline in its revenue. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. If this isn’t the case, try halving the difference and seeing if a balance of that amount has been included in the wrong side of the trial balance, where it would have a double impact on the discrepancy. To achieve this, it is often useful to calculate the difference between the totals as an initial step. In addition to the above, trial balance performs another important function.

What Is an Aged Accounts Payable Report?

Liquidity refers to how quickly an asset could be converted to cash and how quickly a liability will be paid off with cash. The most liquid asset is cash, because it has already been converted to cash (who knew?). Typically, the next most liquid asset is accounts receivable because most companies collect their receivables within 30 days. And finally, in the fourth entry the drawing account is closed to the capital account.

Post-closing trial balance includes only permanent or long-term accounts, which remain open from one accounting period to another, such as assets, liabilities, and equity. Temporary or short-term accounts are not included in a post-closing trial balance because they are closed at the end of each accounting period. A post-closing trial balance is an essential part of accounting and a type of working trial balance. It helps to verify that the total of all accounts in the general ledger is equal after posting the closing entries. In some cases, accounting software programs may produce a ‘trial balance’ report – this term should not be confused with WTB.


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. This fact provides a reasonable assurance that every debit entry in the ledger accounts does have a corresponding credit entry and that no arithmetical error has been made during the balancing process. It is worth noting that the balances of the accounts are bought onto the trial balance.

post closing trial balance definition

Running a trial balance is a must for anyone manually recording financial transactions since it helps to make sure that debits and credits are in balance — which is the core principle of double-entry accounting. Preparing a post-closing trial balance is an important step in the accounting cycle. Completed after closing entries, the post-closing trial balance prepares your accounts for the next period. As balance sheet entries are listed in the trial balance, it is done similarly to the balance sheet with first assets, then liabilities, and then equity.

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