What is an Adjusted Trial Balance?

//What is an Adjusted Trial Balance?
What is an Adjusted Trial Balance? 2017-09-30T05:32:27+00:00

Definition: An adjusted trial balance is a list of accounts and their balances at the end of an accounting period after the adjusting journal entries have been posted. In other words, it’s a trial balance that is prepared at the end of the year to reflect the year-end adjustments.

What Does Adjusted Trial Balance Mean?

What is the definition of adjusted trial balance? Adjusted trial balances are prepared at the end of the accounting cycle and are used to help prepare the financial statements for the period. Before the adjusted TB can be prepared, the year-end adjustments must be made. These adjustments usually include adjustments for prepaid and accrued expenses along with non-cash expenses like depreciation. These adjustments are added to the unadjusted trial balance on the accounting worksheet and the new adjusted TB is prepared.

Example

The format of the adjusted TB is similar to other trial balances. A heading that includes the company name, title of the report, and date is located at the top. The account names are listed on the left with their debit or credit balances listed in the far right two columns. These accounts are listed in balance sheet and income statement order. In other words, the accounts are listed like this: assets, liabilities, equity, income, and expenses. This presentation makes it easier and more organized to prepare the financial statements. Also, managers can use this report to analyze end of period performance and evaluate the effects that the adjustments will have on the financials.

Both the debit and credit columns are totaled at the bottom and must be equal in order to agree with the accounting equation. If the debits and credits don’t agree, there must have been an error posting the adjusting journal entries.

Once an adjusted trial balance is prepared, the company can prepare and issue financial statements and continue the process of closing its books at the end of the accounting cycle.

Summary Definition

Define Adjusted Trial Balance: Adjusted TB means a listing of the chart of accounts with balances after year-end AJEs have been made. This listing is used to prepare the financial statements for the year as well as recording the closing journal entries to close the books for the year.