ACCOUNTING FUNDAMENTALS
Trial Balance and Adjusted Trial Balance
A practical guide to checking ledger balances, recording period-end adjustments, and preparing reliable financial statements.What is a trial balance?
A trial balance lists general ledger accounts and their debit or credit balances at a specific date. Its first check is simple: total debits must equal total credits. The unadjusted trial balance is prepared before period-end adjusting entries; the adjusted trial balance reflects those entries after they have been posted.Why it matters
The report brings the ledger into one view. It helps you identify unusual balances, trace posting differences, organize your closing review, and connect account balances to financial statements. It is an internal accounting report, rather than a substitute for a balance sheet or income statement.Three stages to understand
- Unadjusted: ledger balances before period-end adjustments.
- Adjusted: balances after accruals, deferrals, depreciation, and other required adjustments.
- Post-closing: balances after temporary accounts have been closed; permanent accounts carry forward.
A worked example: from unadjusted to adjusted
Consider an illustrative service business at month-end. All figures below are dollars. A dash means zero. No owner distributions or income taxes are included in this simplified example.| Account | Unadjusted debit | Unadjusted credit | Adjusted debit | Adjusted credit |
|---|---|---|---|---|
| Cash | 10,000 | — | 10,000 | — |
| Accounts receivable | 4,000 | — | 5,000 | — |
| Supplies | 1,200 | — | 400 | — |
| Prepaid insurance | 2,400 | — | 2,200 | — |
| Equipment | 12,000 | — | 12,000 | — |
| Accumulated depreciation | — | — | — | 300 |
| Accounts payable | — | 3,000 | — | 3,000 |
| Unearned revenue | — | 2,000 | — | 1,400 |
| Wages payable | — | — | — | 500 |
| Owner capital | — | 20,000 | — | 20,000 |
| Service revenue | — | 8,000 | — | 9,600 |
| Rent expense | 1,400 | — | 1,400 | — |
| Wages expense | 4,000 | — | 4,500 | — |
| Supplies expense | — | — | 800 | — |
| Insurance expense | — | — | 200 | — |
| Depreciation expense | — | — | 300 | — |
| Total | 35,000 | 35,000 | 36,800 | 36,800 |
The six adjusting entries
- Supplies remaining are $400: debit Supplies Expense $800; credit Supplies $800.
- Insurance used during the month is $200: debit Insurance Expense $200; credit Prepaid Insurance $200.
- Monthly depreciation is $300: debit Depreciation Expense $300; credit Accumulated Depreciation $300.
- Employees earned $500 that has not been paid: debit Wages Expense $500; credit Wages Payable $500.
- Services of $1,000 were earned but not billed: debit Accounts Receivable $1,000; credit Service Revenue $1,000.
- Of the customer advances, $600 is now earned: debit Unearned Revenue $600; credit Service Revenue $600.
How the adjusted balances become statements
Revenue is $9,600 and expenses total $7,200, producing net income of $2,400. Assets total $29,300 after deducting accumulated depreciation. Liabilities total $4,900, and ending equity is $22,400 ($20,000 capital plus $2,400 income). Therefore, assets of $29,300 equal liabilities plus equity of $29,300.Balanced does not mean error-free
An omitted transaction, a duplicate entry, an incorrect account classification, or an equal debit and credit recorded for the wrong amount can leave the trial balance balanced. Reconcile cash, receivables, payables, and other material accounts to independent support. Review cutoff and confirm that required adjustments are complete.A practical month-end checklist
- Select the correct entity, reporting date, and accounting basis.
- Confirm routine transactions are posted and review the unadjusted report.
- Reconcile accounts to bank statements, subledgers, schedules, and supporting documents.
- Document, review, and post correcting and adjusting entries.
- Generate the adjusted trial balance and check debit and credit totals.
- Investigate unexpected balances and compare with prior periods.
- Prepare financial statements and retain the reconciliation and adjustment support.
If the totals do not match
Recalculate the columns, compare each balance with the ledger, and check for missing accounts or one-sided postings. A difference divisible by nine can suggest a transposition; a difference equal to twice an account balance can suggest a debit placed in the credit column. These are clues, not proof. Correct the underlying record and rerun the report.Frequently asked questions
Is a trial balance the same as a balance sheet?
No. A trial balance includes revenue and expense accounts as well as balance sheet accounts. A balance sheet presents assets, liabilities, and equity using the appropriate classifications.Can an adjusted trial balance still contain mistakes?
Yes. It reflects the adjustments posted, but does not establish that every transaction and adjustment is complete, valid, or correctly classified.When should I prepare it?
Use it during each reporting close, commonly monthly, quarterly, and annually. Keep the date and basis consistent with the statements you are preparing.Continue learning
Review Debits, Credits, and Journal Entries, place these reports in the Accounting Cycle, and work through Adjusting Entries. Then follow the financial statements worked example to see how adjusted balances become reports.
Explore the Accounting hub and Learn Business. For the next connection between accurate records and decisions, read Managerial Accounting and How to Build a 13-Week Cash Flow Forecast.