Adjusted Trial Balance | Answers
Identify Adjusted Accounts
Which of the following accounts usually change after adjustments?
Prepaid Rent ✓
Cash ✗
Accumulated Depreciation ✓
Salaries Expense ✓
Capital ✗
Allowance for Doubtful Accounts ✓
From Unadjusted to Adjusted
An unadjusted trial balance shows
Prepaid Insurance = 1,200
Insurance Expense = 0
Adjustment
One month insurance used = 200
➛ Adjusting Entry
Insurance Expense - Dr 200
Prepaid Insurance - 200
➛ New Balances
Prepaid Insurance ➧ 1,000 Dr
Insurance Expense ➧ 200 Dr
➛ Adjusted Trial Balance Placement
Account
Prepaid Insurance
Insurance Expense
Prepaid Insurance
Insurance Expense
Debit
1,000
200
1,000
200
Credit
-
-
-
-
Prepare an Adjusted Trial Balance
Account
Cash
Accounts Receivable
Prepaid Rent
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Capital
Service Revenue
Rent Expense
Salaries Expense
Depreciation Expense
Totals
Cash
Accounts Receivable
Prepaid Rent
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Capital
Service Revenue
Rent Expense
Salaries Expense
Depreciation Expense
Totals
Debit
6,000
2,500
900
12,000
-
-
-
-
-
300
2,000
1,500
27,200
6,000
2,500
900
12,000
-
-
-
-
-
300
2,000
1,500
27,200
Credit
-
-
-
-
3,000
1,800
700
10,000
8,500
-
-
-
27,200
-
-
-
-
3,000
1,800
700
10,000
8,500
-
-
-
27,200
True or False
Adjusted trial balance is prepared before adjusting entries.
➛ False
All accounts must appear in the adjusted trial balance.
➛ True
Depreciation expense appears in the adjusted trial balance.
➛ True
Adjusted trial balance must balance.
➛ True
Only balance sheet accounts are included.
➛ False
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.
Importance
Ensures all accounts are updated before financial statements.
Problems Identified
Missing adjustments
Posting errors
Unequal balances
Next Step
Preparation of Financial Statements
Two Expense Accounts Affected
Salaries Expense
Depreciation Expense
One Liability Created
Salaries Payable
Quick Quiz
What is the main purpose of an adjusted trial balance?
➛ To verify accuracy after adjustments and before financial statements
When is it prepared in the accounting cycle?
➛ After adjusting entries are posted
Adjusted trial balance includes both income statement and balance sheet accounts.
➛ True
Which entries affect the adjusted trial balance?
➛ Adjusting entries
What must be equal in an adjusted trial balance?
➛ Total debits must equal total credits
Income Statement ➧ Here