Adjusted Trial Balance
Module 2:
Completing the Accounting Cycle
Duration:
45-60 minutes
Level:
Beginner to Diploma-Level
Lesson Objectives
➛ Understand what an Adjusted Trial Balance is.
➛ Explain why an adjusted trial balance is prepared.
➛ Transfer adjusted ledger balances correctly.
➛ Prepare an adjusted trial balance after adjusting entries.
➛ Distinguish between unadjusted and adjusted trial balances.
Key Vocabulary
➛ Adjusted Trial Balance
➛ Unadjusted Trial Balance
➛ Adjusting Entries
➛ Ledger Balance
➛ Debit Column
➛ Credit Column
What Is an Adjusted Trial Balance?
An Adjusted Trial Balance is prepared after
➛ Adjusting entries are journalized
➛ Adjustments are posted to the ledger
It ensures
➛ All revenues are earned
➛ All expenses are incurred
➛ Total debits equal total credits
It is the final check before preparing financial statements.
Order of the Accounting Cycle | So Far
➛ Journal Entries
➛ Ledger Posting
➛ Unadjusted Trial Balance
➛ Adjusting Entries
➛ Adjusted Trial Balance
➛ Financial Statements | next classes
Format of an Adjusted Trial Balance
Account Name
Cash
Accounts Payable
...
Totals
Cash
Accounts Payable
...
Totals
Debit
xxxx
-
...
xxxx
xxxx
-
...
xxxx
Credit
-
xxxx
...
xxxx
-
xxxx
...
xxxx
• Each account appears once
• Balances come from adjusted ledger accounts
Identify Adjusted Accounts
Which of the following accounts usually change after adjustments?
➛ Prepaid Rent
➛ Cash
➛ Accumulated Depreciation
➛ Salaries Expense
➛ Capital
➛ Allowance for Doubtful Accounts
Select all that apply
From Unadjusted to Adjusted
An unadjusted trial balance shows
Prepaid Insurance = 1,200
Insurance Expense = 0
Adjustment
One month insurance used = 200
Task
➛ Show the adjusting entry
➛ State the new balances
➛ Indicate where each appears in the adjusted trial balance
Prepare an Adjusted Trial Balance
After posting adjustments, the following balances exist
Cash
Accounts Receivable
Prepaid Rent
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Capital
Service Revenue
Rent Expense
Salaries Expense
Depreciation Expense
Accounts Receivable
Prepaid Rent
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Capital
Service Revenue
Rent Expense
Salaries Expense
Depreciation Expense
6,000 D
2,500 D
900 D
12,000 D
3,000 C
1,800 C
700 C
10,000 C
8,500 C
300 D
2,000 D
1,500 D
2,500 D
900 D
12,000 D
3,000 C
1,800 C
700 C
10,000 C
8,500 C
300 D
2,000 D
1,500 D
Prepare the adjusted trial balance.
True or False
➛ Adjusted trial balance is prepared before adjusting entries.
➛ All accounts must appear in the adjusted trial balance.
➛ Depreciation expense appears in the adjusted trial balance.
➛ Adjusted trial balance must balance.
➛ Only balance sheet accounts are included.
Mini Case Study
A consulting firm completed all adjustments at year-end. The accountant now wants to confirm the books are correct before preparing financial statements.
Questions
➛ Why is the adjusted trial balance important at this stage?
➛ What problems can it help identify?
➛ What comes immediately after the adjusted trial balance?
➛ Name two expense accounts likely affected by adjustments.
➛ Name one liability account created by adjustments.
Quick Quiz
➛ What is the main purpose of an adjusted trial balance?
➛ When is it prepared in the accounting cycle?
➛ True or False | Adjusted trial balance includes both income statement and balance sheet accounts.
➛ Which entries affect the adjusted trial balance?
➛ What must be equal in an adjusted trial balance?
Answers ➧ Here
Income Statement ➧ Here