What is an Unadjusted Trial Balance?

Unadjusted Trial Balance

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Unadjusted Trial Balance

An “Unadjusted Trial Balance” is a list of all the general ledger accounts and their respective balances at a specific point in time before any adjustments are made for year-end or period-end adjusting entries. This report provides a snapshot of the company’s accounts at a raw level, displaying the balances without considering necessary adjustments.

The main purpose of the unadjusted trial balance is to ensure that the total debits equal the total credits. It’s a preliminary step, and if there are discrepancies, it indicates there might be errors in the journal entries or ledger accounts.

Here’s a simplified structure of how it looks:

Unadjusted Trial Balance as of [Date]

Account NameDebit ($)Credit ($)
Cash20,000
Accounts Receivable10,000
Supplies5,000
Equipment50,000
Accounts Payable10,000
Unearned Revenue5,000
Owner’s Equity50,000
Revenues20,000
Expenses15,000
Totals100,000100,000

In the above table:

  • The total of debit balances ($100,000) equals the total of credit balances ($100,000).
  • No adjustments have been made yet for expenses that might have been incurred but not yet recorded or for revenues that have been earned but not yet recorded.

After the unadjusted trial balance, accountants typically prepare adjusting entries to account for items like accrued expenses, accrued revenues, prepaid expenses that are now used up, and unearned revenue that has now been earned. Following these adjustments, an “Adjusted Trial Balance” is prepared, which serves as the basis for preparing the financial statements of the entity.

Example of an Unadjusted Trial Balance

Let’s walk through an example of preparing an unadjusted trial balance for a fictional company called “Green Leaf Landscaping.”

Background:
Green Leaf Landscaping started its operations recently. By the end of the first month, the company’s accountant wants to ensure that debits and credits are balanced, so an unadjusted trial balance is prepared.

Here’s a summarized version of Green Leaf’s ledger accounts:

  • Cash: $10,000 (Debit balance)
  • Accounts Receivable: $2,000 (Debit balance)
  • Supplies: $500 (Debit balance)
  • Equipment: $5,000 (Debit balance)
  • Accounts Payable: $1,500 (Credit balance)
  • Owner’s Equity (Owner’s Capital): $15,000 (Credit balance)
  • Service Revenue: $3,500 (Credit balance)
  • Salaries Expense: $1,000 (Debit balance)
  • Rent Expense: $500 (Debit balance)

Unadjusted Trial Balance for Green Leaf Landscaping (Month-End)

Account NameDebit ($)Credit ($)
Cash10,000
Accounts Receivable2,000
Supplies500
Equipment5,000
Accounts Payable1,500
Owner’s Equity15,000
Service Revenue3,500
Salaries Expense1,000
Rent Expense500
Totals19,00020,000

Oh no! The debits and credits don’t match! There’s a discrepancy of $1,000. This means there might be an error in the ledger accounts or in the postings from the journal entries to the ledger. The accountant will need to trace and find the discrepancy to ensure the debits and credits are equal.

Note: In real life, any discrepancies would need to be resolved before proceeding further. Adjustments would then be made after the balances are correctly matched.

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