Adjusted Trial Balance

An adjusted trial balance is a financial statement prepared after all adjusting entries have been made at the end of an accounting period.

What is Adjusted Trial Balance?

An adjusted trial balance is a financial statement prepared after all adjusting entries have been made at the end of an accounting period. It reflects the balances of all accounts after accounting for adjustments required to accurately represent the company’s financial position and performance.

Purpose of an Adjusted Trial Balance

1. Accurate Financial Reporting: It ensures that all revenues and expenses are recognized in the period they occur, providing a more accurate depiction of the company’s financial performance.
2. Basis for Financial Statements: It serves as the final step before preparing the company’s formal financial statements, such as the income statement, balance sheet, and statement of cash flows.
3. Verification: It helps verify that the debits and credits are still balanced after adjustments are made, confirming the accuracy of the financial records.

Key Features of an Adjusted Trial Balance

1. Adjustment Entries: It includes adjustments made for accrued revenues, accrued expenses, deferred revenues, deferred expenses, and any other necessary corrections.
2. Updated Balances: The balances in the adjusted trial balance reflect these adjustments, providing a corrected view of the company’s financial status.
3. Debits and Credits: As with the unadjusted trial balance, the total debits should equal the total credits, indicating that the accounting records are balanced.

Example

Here’s a simplified example of how an adjusted trial balance might look:

Unadjusted Trial Balance

Account	Debit ($)	Credit ($)
Cash	10,000
Accounts Receivable	5,000
Supplies	1,500
Accounts Payable		3,000
Service Revenue		7,000
Salaries Expense	2,000
Capital		6,500
Total	18,500	16,500

Adjustments

1. Accrued Salaries: $500 (Salaries Expense needs to be increased by $500)
2. Supplies Used: $300 (Supplies Expense needs to be adjusted for the amount used)

Adjusted Trial Balance

Account	Debit ($)	Credit ($)
Cash	10,000
Accounts Receivable	5,000
Supplies	1,200
Accounts Payable		3,000
Service Revenue		7,000
Salaries Expense	2,500
Capital		6,500
Total	18,700	16,500

In this adjusted trial balance:

• Total Debits: $18,700
• Total Credits: $16,500

If the adjusted trial balance still does not balance, it indicates further errors or adjustments are needed. The adjusted trial balance is crucial for ensuring the accuracy and completeness of the financial statements before final reporting.