What is an adjusted trial balance?

Definition

An Adjusted Trial Balance is the Trial Balance reprinted after period-end adjusting journal entries are posted. It is still a proof that debits equal credits, and it is the listing you use to draft the Balance Sheet and Income Statement.

In books language, this is the same account list as the unadjusted Trial Balance, with accruals, deferrals, and corrections now sitting in the balances. If the columns still match, the ledger is in balance after those adjustments.

Where it shows up

Balance Sheet: Related to the adjusted asset, liability, and equity balances.

P&L: Related to the adjusted income and expense balances.

Cash flow: Related to nothing extra.

See also: Trial Balance · Adjusting Journal Entry · Financial Statement Package

You will not issue the Adjusted Trial Balance as a page in the Financial Statement Package. It is an internal listing that supports those statements, not a statement itself.

The listing still includes Balance Sheet accounts such as cash, accounts receivable, and current liabilities, and it still includes P&L accounts such as revenue and expenses. The difference from the earlier listing is that unpaid wages, unused prepaid amounts, and similar cutoff items are now in the numbers.

The Statement of Cash Flows is not built as a separate section of this listing. Cash is one account on the Adjusted Trial Balance, and operating cash still comes from how cash moved, not from the reprint itself.

How it works

You print a Trial Balance after the last routine posting of the period. That first listing shows the books before cutoff work, so unpaid wages and similar items may still be missing.

Period-end adjustments then record those items, such as accrued wages that raise expense and a liability, prepaid rent that moves from an asset into expense, and depreciation that reduces an asset and records expense. Each of those postings changes at least two account balances.

You then reprint the Trial Balance, and the new listing is the Adjusted Trial Balance. The two columns should still match, because every adjustment was itself in balance.

From that listing you draft the statements: asset, liability, and equity lines feed the Balance Sheet, and revenue and expense lines feed the Income Statement. Because the adjustments are already in, the statements include what belongs in the period.

If the Adjusted Trial Balance does not balance, an adjustment is missing a side or an amount was keyed wrong. You fix that in the general ledger and reprint before you issue anything.

The Adjusted Trial Balance is not the last listing of the year. After closing entries, a later listing keeps only Balance Sheet accounts, and that later report is the Post-Closing Trial Balance.

Example

A florist reprints account balances after accruing $200 of unpaid wages at month-end. Wage expense is $200 higher than on the first Trial Balance, and accrued wages now sit in current liabilities for the same $200.

The debit column and the credit column still match. The florist drafts the Income Statement from the new wage expense figure and drafts the Balance Sheet with the new accrued wages line included.

Common mix-ups

An Adjusted Trial Balance is not the first Trial Balance of the close. The first listing is unadjusted, taken before period-end accruals and deferrals, and the adjusted listing is the reprint after those postings.

An Adjusted Trial Balance is not a Financial Statement Package. The package is the issued Balance Sheet, Income Statement, and supporting schedules, and the Adjusted Trial Balance is the internal proof those statements were drafted from.

An Adjusted Trial Balance is not a Post-Closing Trial Balance. The adjusted listing still shows income and expense, and the post-closing listing is printed after those accounts have been zeroed into equity.

Related terms

• Trial Balance: A listing of every ledger account balance, used to check that debits equal credits.
• Adjusting Journal Entry: An entry made at period end to record accruals, deferrals, and corrections.
• Financial Statement Package: The bundled set of statements and schedules delivered after a close.
• Month-End Close: The monthly version of the close, ending in issued financial statements.
• General Ledger: The master record of every account and every posted transaction.
• Balance Sheet Reconciliation: Reconciling every balance-sheet account as part of the close.
• Post-Closing Trial Balance: The trial balance produced after closing entries, showing only balance-sheet accounts.
• Flux Analysis: Explaining why each account moved compared with the prior period.