What is Post Closing Trial Balance?
Post-Closing Trial Balance is an accuracy check that is done to verify that all debit balances equal all credit balances and hence net balance should be zero. The post-closing trial balance presents a list of the accounts and their balances after closing entries have been written and posted in the ledger.
Post-closing trial balance determines whether there are any balances remaining in the permanent accounts after closing entries have been journalized. The post-closing trial balance account contains no sales revenue entries, no expense entries, no gain or loss entries etc. since these are determined to be temporary accounts and as part of the closing process, the balances in these are moved to the retained earnings account.
There are three types of trial balance in accounting. They are an unadjusted trial balance, adjusted trial balance and post-closing trial balance. All of the above are used to test whether all debits equals all credits.
- The unadjusted trial balance is prepared after entries for transactions have been journalized and posted to the ledger.
- An adjusted trial balance contains nominal and real accounts. Nominal accounts are those which have entries from the income statement and real accounts are those which have entries from the balance sheet.
- The post-closing trial balance is used to check the debits and credits after closing entries for transactions have been made.
Then the job of the accountant is to determine whether there is a zero net balance i.e. all debit balances equals all credit balances. Then the accountant raises a flag to make sure that no further transactions are being recorded for the old accounting period and hence any further transactions are recorded for the next accounting period. As mentioned above, the post-closing trial balance ensures that there are no temporary accounts remaining and all debit balances equal all credit balances.
The Format for Post-Closing Trial Balance
Post-closing trial balance has a similar format to other trial balances. It contains columns for the account number, account description, debits and credits for any business or firm. Various accounting software makes it mandatory that all journal entries must be balanced before allowing them to be posted to the general ledger. Hence it is improbable to have a trial balance which is unbalanced.
As balance sheet entries are listed in the trial balance, it is done in similar ways balance sheet with first assets than liabilities and then equity. Both the debits and credits totals are calculated at the end and if these are not equal, one can know that there must have been some mistake in preparing the trial balance.
Similar to the financial reports, trial balances are prepared with three headings which lists the company name, type of trial balance and ending date of the reporting period.
Example of Post-Closing Trial Balance
Let’s take an example of a post-closing trial balance for a company XYZ.
This has been a guide to Post Closing Trial Balance. Here we discuss the format of the Post-Closing Trial Balance (account number, account description, debit, credit) and its examples. You can learn more about from the following articles –