Adjusted Trial Balance
An adjusted trial balance is a financial report that lists all the general ledger accounts along with their balances after accounting for all adjusting entries at the end of an accounting period. The adjusted trial balance serves as a basis for preparing the financial statements, such as the income statement, balance sheet, and statement of cash flows.
The adjusted trial balance ensures that the total debits and credits in the general ledger are equal after all adjusting entries have been recorded. Adjusting entries typically include accruals, deferrals, and estimates to accurately reflect the financial position of the company at the end of the accounting period.
Example of an Adjusted Trial Balance
Here is an example of a company’s adjusted trial balance at the end of the accounting period:
| Account Name | Debit | Credit |
|---|---|---|
| Cash | 50,000 | – |
| Accounts Receivable | 20,000 | – |
| Inventory | 30,000 | – |
| Prepaid Insurance | 6,000 | – |
| Office Equipment | 15,000 | – |
| Accumulated Depreciation – Office Equipment | – | 3,000 |
| Accounts Payable | – | 10,000 |
| Salaries Payable | – | 5,000 |
| Unearned Revenue | – | 4,000 |
| Notes Payable | – | 12,000 |
| Common Stock | – | 35,000 |
| Retained Earnings | – | 15,000 |
| Sales Revenue | – | 85,000 |
| Cost of Goods Sold | 40,000 | – |
| Insurance Expense | 2,000 | – |
| Salaries Expense | 25,000 | – |
| Rent Expense | 8,000 | – |
| Depreciation Expense | 3,000 | – |
| Interest Expense | 1,000 | – |
|---|---|---|
| Totals | 176,000 | 176,000 |
In this example, all the general ledger accounts and their respective balances have been adjusted, and the debits and credits are equal, ensuring that the financial statements can be accurately prepared. Adjusting entries have been made for items such as prepaid insurance, depreciation, and salaries payable to ensure that the financial position of the company at the end of the accounting period is accurately reflected.
