Adjusted trial balance

Definition

An adjusted trial balance is a list of all the general ledger accounts and their balances after adjustments have been made. It ensures that total debits equal total credits, confirming the accuracy of the accounting entries.

5 Must Know Facts For Your Next Test

1. Adjusted trial balances are prepared after adjusting journal entries are posted.
2. It includes both the original ledger balances and any adjustments made at the end of the period.
3. The primary purpose is to confirm that debits equal credits after adjustments.
4. It serves as a basis for preparing financial statements like the income statement and balance sheet.
5. Common adjustments include accrued revenues, accrued expenses, depreciation, and prepaid expenses.

Review Questions

• What is the main purpose of creating an adjusted trial balance?
• Which types of entries are included in an adjusted trial balance?
• How does an adjusted trial balance ensure accuracy in financial statements?

Related terms

Unadjusted Trial Balance:

A list of all general ledger accounts and their balances before any adjustments are made.

Adjusting Journal Entries: Entries made at the end of an accounting period to allocate income and expenditures to the correct period.

Accruals:

Revenues earned or expenses incurred which impact a company's net income but have not yet been recorded through normal transactions.