PREPARING of AN ADJUSTED TRIAL BALANCE
ADJUSTED TRIAL BALANCE
• A trial balance is the list of balances of ledger accounts posted in compliance with the double entry accounting concept. An adjusted trial balance is prepared after making all adjusting entries in the ledger accounts. Balances posted in the adjusted trial balance are up to date and used to prepare the final financial statements. Preparation of the adjusted trial balance forms part of the accounting cycle. It involves nine steps. http://www.ehow.com/info_10023977_nine-steps-preparing-adjusted-trial-balance.html#ixzz2NJh465DD
Steps in the Accounting Cycle
Identify the Transaction
Identify the event as a transaction and generate the source document.
Analyze the Transaction
Determine the transaction amount, which accounts are affected, and in which direction.
Journal Entries
The transaction is recorded in the journal as a debit and a credit.
Post to Ledger
The journal entries are transferred to the appropriate T-accounts in the ledger.
Trial Balance
A trial balance is calculated to verify that the sum of the debits is equal to the sum of the credits.
STEPS IN THE ACCOUNTING CYCLE
Trial Balance
A trial balance is calculated to verify that the sum of the debits is equal to the sum of the credits.
Adjusting Entries
Adjusting entries are made for accrued and deferred items. The entries are journalized and
posted to the T-accounts in the ledger.
Adjusted Trial Balance
A new trial balance is calculated after making the adjusting entries.
The Adjusted Trial Balance
will also show the balance o all the accounts irrespective of whether they were involved in the adjustment. The accounts involved in the adjustment will show the updated or adjusted balance
The purpose of preparing the Adjusted Trial Balance
is to show the effect of all financial events that had occurred in the accounting period. The Adjusted Trial Balance is to verify that the total debit and total credit are equal for all the accounts in the ledger after the adjustments
PREPARING of AN ADJUSTED TRIAL BALANCE
Identify Transactions and Prepare Source Documents
Classify and Journalize Transactions
Prepare Ledger Accounts
Prepare the Trial Balance
Correct Discrepancies and Prepare Adjusting Entries
Post Adjusting Entries and Prepare Adjusted Trial Balance
Post Adjusting Entries and Prepare Adjusted Trial Balance
THE WORKSHEET
Account titles
Unadjusted Trial Balance
Adjustments
Debit Credit Debit Credit
Cash 6500 Accounts Receivable 4200 Office supplies 1550 Prepaid Insurance 1800 Prepaid Rent 240 Furniture and Fixtures 3300 Accumulated Depreciation
800
Notes Payable 2500 Accounts Payable 3700 Alex Bell, Capital 5905 Alex Bell, Withdrawals 6000 Consulting Revenue 20300 Rent Expense 2640 Salary Expense 6250 Telephone Expense 725 33205 33205
Alex Bell Consultant Pharmacist
Worksheet Year Ended October 31, 2006
ADJUSTMENTS
• Assume that data are available to make the necessary adjustments for
Alex Bell as of October 31, 2011, the end of the fiscal year:
• (1) unused supplies amount to $1200;
• (2) there is the three-year prepaid insurance policy purchased on
November 1, 2011;
• (3) the balance of prepaid rent represents rent for October, 2011 paid
on October 1, 2011;
• (4) depreciation on furniture and fixtures is $400;
• (5) salary expense of $300 was incurred, but not yet paid by October
31, 2011.
Account titles
Unadjusted Trial Balance Adjustments
Debit Credit Debit Credit
Cash 6500
Accounts Receivable 4200
Office supplies 1550 350
Prepaid Insurance 1800 600
Prepaid Rent 240 240
Furniture and Fixtures 3300
Accumulated Depreciation 800 400
Notes Payable 2500
Salaries Payable 300
Accounts Payable 3700
Alex Bell, Capital 5905
Alex Bell, Withdrawals 6000
Consulting Revenue 20300
Supplies Expenses 350
Rent Expense 2640 240
Salary Expense 6250 300
Insurance Expense 600
Telephone Expense 725
Depreciation Expense 400
33205 33205 1890 1890
Year Ended October 31, 2006
Adjusted Trial Balance
Account titles
Unadjusted Trial Balance Adjustments Adjusted Trial Balance
Debit Credit Debit Credit Debit Credit Cash 6500 6500
Accounts
Receivable
4200 4200
Office supplies 1550 350 1200
Prepaid Insurance 1800 600 1200
Prepaid Rent 240 240 -
Furniture and
Fixtures
3300 3300
Accumulated
Depreciation
800 400 1200
Notes Payable 2500 2500
Salaries Payable 300 300
Accounts Payable 3700 3700
Alex Bell, Capital 5905 5905
Alex Bell,
Withdrawals
6000 6000
Consulting Revenue
20300 20300
Supplies Expenses
350 350
Rent Expense 2640 240 2880
Salary Expense 6250 300 6550
Insurance Expense
600 600
Telephone Expense
725 725
Depreciation
Expense
400 400
33205 33205 1890 1890 33905 33905
Accounts
Their measurement function spans all the accounting
periods in the life of a firm.
They have a functional life of one accounting period only in order to permit the periodic measurement of net income.
real or permanent nominal or temporary
The closing entry process consists of a series of four journal entries:
• (1) an entry to close the revenue accounts and transfer the balances to an income summary account;
• (2) an entry to close the expense accounts and transfer the balances to the income summary account;
• (3) an entry to close the income summary account and transfer the balance, which represents net income or net loss, to the owner capital account;
• (4) an entry to close the owner withdrawals account and transfer the balance to the owner capital account.
To close out the account, an offsetting debit journal entry of $20,300 is made
to consulting revenue and a credit entry of the same amount is made to the
income summary account.
Oct 31 Consulting Revenue 20300
Income Summary 20300
To close the revenue
account
The closing entry process
The sum of all the direct entries is debited to the
income summary account:
Oct 31 Income Summary 11530
Rent Expense 2880
Salary Expense 6550
Telephone Expense 725
Supplies Expense 350
Insurance Expense 600
Depreciation Expense 400
Interest Expense 25
To close the expense account
The closing entry process (closing income summary account)
Oct 31 Income Summary 8770
Alex Bell, Capital 8770
To close income summary
and transfer net income
The final step is to close the owner withdrawals
account.
Oct 31 Alex Bell, Capital 6000
Alex Bell, Withdrawals 6000
To close withdrawals account
POST-CLOSING TRIAL BALANCE
Debit Credit
Cash $ 6,500
Accounts Receivable 4,200
Office Supplies 1,200
Prepaid Insurance 1,200
Furniture and Fixtures 3,300
Accumulated Depreciation $ 1,200
Notes Payable 2,500
Accounts Payable 3,700
Accrued Salaries Payable 300
Accrued Interest Payable 25
Alex Bell, Capital 8,675
$16,400 $16,400
Alex Bell, Consultant Pharmacist
Post-Closing Trial Balance October 31, 19X7