After the closing entries are journalized and posted, only permanent, balance sheet accounts remain open. A post‐closing trial balance is prepared to check the clerical accuracy of the closing entries and to prove that the accounting equation is in balance before the next accounting period begins. Since temporary accounts are already closed at this point, the post-closing trial balance will not include income, expense, and withdrawal accounts. It will only include balance sheet accounts, a.k.a. real or permanent accounts. All temporary accounts with zero balances were left out of this statement. Unlike previous trial balances, the retained earnings figure is included, which was obtained through the closing process.

Even if you’re using accounting software, running a trial balance can be important because it allows you to review account balances for accuracy. Before that, it had a credit balance of 9,850 as seen in the adjusted trial balance above. It is worth mentioning that there is one step in the process that a company may or may not include, step 10, reversing entries.

2 Prepare a Post-Closing Trial Balance

Preparing the post-closing trial balance will follow the same process that took to create the unadjusted or adjusted trial balance. Each account balance is transferred from their ledger accounts to the post-closing trial balance. All accounts with a debit balance will be listed on the debit side of the trial balance and all accounts with a credit balance will be listed on the credit side of the trial balance. After the unadjusted trial balance is prepared and it appears error-free, a company might look at its financial statements to get an idea of the company’s position before adjustments are made to certain accounts.

The final total in the debit column must be the same dollar amount that is determined in the final credit column. For example, if you determine that the final debit balance is $24,000 then the final credit balance in the trial balance must also be $24,000. If the two balances are not the post-closing trial balance helps to verify that equal, there is a mistake in at least one of the columns. The purpose of closing entries is to close all temporary accounts and adjust the balances of real accounts such as owner’s capital. Like all of your trial balances, the post-closing balance of debits and credits must match.

Unadjusted trial balance

If the final balance in the ledger account (T-account) is a credit balance, you will record the total in the right column. A post-closing trial balance is, as the term suggests, prepared after closing entries are recorded and posted. It is the third (and last) trial balance prepared in the accounting cycle. The balances of the nominal accounts (income, expense, and withdrawal accounts) have been absorbed by the capital account – Mr. Gray, Capital. Hence, you will not see any nominal account in the post-closing trial balance. Nominal accounts are those that are found in the income statement, and withdrawals.

A post-closing trial balance is a listing of all balance sheet accounts containing non-zero balances at the end of a reporting period. The post-closing trial balance is used to verify that the total of all debit balances equals the total of all credit balances, which should net to zero. Another thing to observe https://personal-accounting.org/what-is-the-accounting-cycle/ is that as expected we do not see any temporary account balances in the post-closing trial balance. All the revenue and expense accounts have successfully been closed out into an income summary account and then the income summary account balance has also been transferred to retained earnings account.

Overview: What is a post-closing trial balance?

Its purpose is to test the equality between debits and credits after the recording phase. The ninth, and typically final, step of the process is to prepare a post-closing trial balance. The word “post” in this instance means “after.” You are preparing a trial balance after the closing entries are complete. Because you made closing entries for revenue and expenses, those accounts do not appear on the post-closing trial balance. You’ll also notice that the owner’s capital account has a new balance based on the closing entries you made earlier.

• The unadjusted trial balance in this section includes accounts before they have been adjusted.
• The trial balance worksheet contains columns for both income statement and balance sheet entries, allowing you to easily combine multiple entries into a single amount.
• At the bottom of the debit balance and credit balance columns will be a total for each.
• The post-closing trial balance is used to verify that the total of all debit balances equals the total of all credit balances, which should net to zero.
• Like an unadjusted or an adjusted trial balance, it will have accounts listed in order of either their account numbers or in the order they appear on the balance sheet.

Since most trial balances do not list accounts with zero balances, the post-closing trial balance will include only general ledger balance sheet accounts having balances other than $0.00. The debit and credit amount columns will be summed and the totals should be identical. Preparing an unadjusted trial balance is the fourth step in the accounting cycle.

If you like quizzes, crossword puzzles, fill-in-the-blank, matching exercise, and word scrambles to help you learn the material in this course, go to My Accounting Course for more. There are three main types of trial balance reports that you can run, with each trial balance run during a specific part of the accounting cycle. The next step of the accounting cycle is to prepare the reversing entries for the beginning of the next accounting cycle. (Figure)Identify which of the following accounts would be listed on the company’s Post-Closing Trial Balance. (Figure)Identify which of the following accounts would not be listed on the company’s Post-Closing Trial Balance.

• The post-closing trial balance contains real accounts only since all nominal accounts have already been closed at this stage.
• A trial balance is an important step in the accounting process, because it helps identify any computational errors throughout the first three steps in the cycle.
• Additionally, the post-closing trial balance will have a retained earnings account which contains the balances of all temporary accounts that have been closed out.
• Once all balances are transferred to the unadjusted trial balance, we will sum each of the debit and credit columns.

All the temporary accounts like revenue and expense accounts have been closed out into the retained earnings account via the income summary account (as previously explained). The post-closing trial balance report lists down all the individual accounts after accounting for the closing entries. At this point in the accounting cycle, all the temporary accounts have been closed and zeroed out to permanent accounts. Therefore, a post-closing trial balance will include a list of all permanent accounts that still have balances.