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Post-Closing Trial Balance - Example, Purpose Format, Preparation, Errors
Post-Closing Trial Balance - Example, Purpose Format, Preparation, Errors
Common Errors
Next Step
FAQs
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. This will be
identical to the items appearing on a balance sheet.
1. Journal Entries
2. T-Accounts
3. Unadjusted Trial Balance
4. Adjusting Entries
5. Adjusted Trial Balance
6. Preparing Financial Statements
7. Accounting Worksheet
8. Closing Entries
9. Income Summary Account
10. Post-Closing Trial Balance (you are here)
11. Reversing Entries
We also have an accompanying spreadsheet that shows you an example of each step.
To verify that all the temporary accounts have been closed off accurately
To check if the debit and credit column totals match. If they do not, this could mean that there has been an error in
journalizing the closing entries or while posting them to the ledger.
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3/19/23, 2:00 PM Post-Closing Trial Balance | Example, Purpose Format, Preparation, Errors
The post-closing trial balance will reflect the final balances for the company accounts at the end of the financial
reporting period. These ending balances will become opening balances for the next accounting period.
Totals of both the debit and credit columns will be calculated at the bottom end of the post-closing trial balance. These
columns should balance, otherwise, it would likely mean that there has been an error in the posting of the adjusting
entries.
The adjusted trial balance should have a proper header that should be in a similar format as below:
Company A
Post-Closing Trial Balance
As of January 31, 2020
Preparation
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.
The difference between the unadjusted trial balance and the adjusted trial balance is the adjusting entries that are
required to align the company accounts for the matching principle. Whereas, the difference between an adjusted trial
balance and a post-closing trial balance is the closing entries that are required to close off the temporary accounts and
transfer their balances to the permanent accounts so that they can be listed on the balance sheet.
Common Errors
Some common errors occur while creating the post-closing trial balance. Some of them are:
The debit accounts are incorrectly listed as credit accounts or vice versa.
Some accounts are mistakenly missed out on while posting to the post-closing trial balance.
Some accounts are repeated multiple times.
There has been an error in journalizing the closing entries in the preceding step of the accounting cycle.
The above-mentioned factors could be all those factors that result in the debit columns totals do not match with the
credit column totals.
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3/19/23, 2:00 PM Post-Closing Trial Balance | Example, Purpose Format, Preparation, Errors
As we can see from the above example, the debit and the credit columns balances are matching. This means that there
is no error while posting the closing entries to their individual accounts and then listing those account balances on the
post-closing trial balance.
Another thing to observe 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. The retained
earnings account is a new permanent account listed on this trial balance which you won’t find in the trial balances
(adjusted and unadjusted) that preceded the post-closing trial balance.
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3/19/23, 2:00 PM Post-Closing Trial Balance | Example, Purpose Format, Preparation, Errors
We can observe the difference between the adjusted trial balance and the post-closing trial balance. 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).
Another peculiar thing about Bob’s post-closing trial balance is that normally a retained earnings account will have a
credit balance, but in Bob’s books, it has a debit balance. The reason is that Bob did not make a profit in the first month
of his operations. In fact, he made a net loss totaling $6,050.
Next Step
The next step of the accounting cycle is to prepare the reversing entries for the beginning of the next accounting cycle.
FAQs
A post-closing trial balance is a report that lists the balances of all the accounts in a company’s general ledger after the
closing entries have been posted.
The purpose of a post-closing trial balance is to ensure that all the individual account balances match the debit and
credit columns. This report is used to identify any errors that may have been made while posting the closing entries.
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