Post Closing Trial Balance

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What is Post Closing Trial Balance?

Post Closing Trial Balance is the list of all the balance sheet items and their balances, excluding the zero balance accounts. It is used for verification that temporary accounts are properly closed and that the total balances of all the debit accounts and all the credit accounts are equal.

Post-Closing Trial Balance is an accuracy check to verify that allIn a General Ledger, when the total credit entries are less than the total number of debit entries, it refers to a debit balance. A debit balance is a net amount often calculated as debit minus credit in the General Ledger after recording every transaction.read more debit balancesDebit BalancesIn a General Ledger, when the total credit entries are less than the total number of debit entries, it refers to a debit balance. A debit balance is a net amount often calculated as debit minus credit in the General Ledger after recording every transaction.read more equal all credit balances, and hence net balance should be zero. It presents a list of accounts and balances after closing entries have been written and posted in the ledger.

Also, it determines whether any balances are remaining in the permanent accounts after closing entries have been journalized. Since these are determined to be temporary accounts, it contains no sales revenue entries, expense journal entries, no gain or loss entries, etc. As part of the closing process, the balances in these movements to the retained earnings accountRetained Earnings AccountRetained Earnings are defined as the cumulative earnings earned by the company till the date after adjusting for the distribution of the dividend or the other distributions to the investors of the company. It is shown as the part of owner’s equity in the liability side of the balance sheet of the company.read more.

Post Closing Trial Balance

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Why do you need Post-Closing Trial Balance?

There are three types of trial balance in accounting. They are an unadjusted trial balanceAn Unadjusted Trial BalanceAn unadjusted trial balance is the account balances reported directly from the general ledger without adjusting for the year-end journal entries. It acts as a starting point for analyzing account balances and adjusting entries.read more, adjusted trial balance, and post-closing trial balance. All of the above tests whether all debits equal all credits.

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Then the accountant’s job is to determine whether there is a zero net balance, i.e., all debit balances equal all credit balances. Then the accountant raises a flag to ensure that no further transactions are recorded for the old accounting period. Hence, any additional transactions are recorded for the next accounting period. As mentioned above, it ensures that no temporary accounts are remaining and all debit balances equal all credit balancesCredit BalancesCredit Balance is the capital amount that a company owes to its customers & it is reflected on the right side of the General Ledger Account. Usually, Liability accounts, Revenue accounts, Equity Accounts, Contra-Expense & Contra-Asset accounts tend to have the credit balance. read more.

Format

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It has a similar format to other trial balances. It contains columns for the account number, description, debits, and credits for any business or firm.Wave Accounting Software, Akaunting Software, Slick Pie Accounting Software, GnuCash Accounting Software, xTuplePostBoks Accounting Software, Inv24 Accounting and Inventory Software, and NCH Express Accounts Accounting Software are among the best accounting softwares available.read more Various accounting softwareVarious Accounting SoftwareWave Accounting Software, Akaunting Software, Slick Pie Accounting Software, GnuCash Accounting Software, xTuplePostBoks Accounting Software, Inv24 Accounting and Inventory Software, and NCH Express Accounts Accounting Software are among the best accounting softwares available.read more 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 an unbalanced trial balance.

As balance sheet entries are listed in the trial balance, it is done similarly to the balance sheet with first assets, then liabilities, and then equity. Both the debits and credit totals are calculated at the end, and if these are not equal, one can know there must have been some mistake in preparing the trial balance.

Similar to the financial reportsFinancial ReportsFinancial reporting is a systematic process of recording and representing a company’s financial data. The reports reflect a firm’s financial health and performance in a given period. Management, investors, shareholders, financiers, government, and regulatory agencies rely on financial reports for decision-making.read more, trial balances are prepared with three headings, which list 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 for a company XYZ.

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This article 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 it from the following articles –

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