An adjusted trial balance is the listing of every general ledger account with its balance in a debit or a credit column, both columns totalled, run after the period’s adjusting entries have been journalized and posted. It is the version of the listing the financial statements are summarized from.
What Gets Booked Between the Two Runs
The run before those entries is the unadjusted trial balance. The standard’s picture of that period-end process includes the procedures used to initiate, authorize, record and process journal entries in the general ledger, and the procedures used to record recurring and nonrecurring adjustments to the annual financial statements (PCAOB, AS 2110, paragraph .32). Those last two are what runs between the two listings.
In a set of books those are the period-end entries: an accrual, a deferral, depreciation, and any correction the review turned up.
Some adjustments never reach the listing at all. Adjustments such as consolidating adjustments, report combinations and reclassifications generally are not reflected in formal journal entries (PCAOB, AS 2401, paragraph .61). An adjustment made on a statement draft rather than in the ledger moves the statements without moving any balance on the adjusted trial balance.
A Worked Before and After
Say a firm’s books tie before any period-end entry is booked.
Unadjusted Debit Credit
Cash 22,000
Accounts receivable 41,000
Prepaid insurance 7,200
Equipment 18,000
Accumulated depreciation 6,000
Accounts payable 9,300
Unearned fees 12,000
Owner's capital 40,000
Fees earned 77,700
Salaries expense 44,800
Rent expense 12,000
Totals 145,000 145,000Four adjusting entries are then journalized and posted: expired insurance, salaries earned but unpaid, part of the unearned fees now earned, and the period’s depreciation.
Adjusting entries Debit Credit
Insurance expense 2,400
Prepaid insurance 2,400
Salaries expense 3,600
Salaries payable 3,600
Unearned fees 5,000
Fees earned 5,000
Depreciation expense 3,000
Accumulated depreciation 3,000The listing is run again on the same ledger.
Adjusted Debit Credit
Cash 22,000
Accounts receivable 41,000
Prepaid insurance 4,800
Equipment 18,000
Accumulated depreciation 9,000
Accounts payable 9,300
Salaries payable 3,600
Unearned fees 7,000
Owner's capital 40,000
Fees earned 82,700
Salaries expense 48,400
Rent expense 12,000
Insurance expense 2,400
Depreciation expense 3,000
Totals 151,600 151,600Two of the four entries lifted the totals, because the salaries accrual and the depreciation entry each raised one account’s debit balance and another account’s credit balance at once. The other two raised one account and reduced another on the same side, so the column totals never moved. The change in the total is not the size of the adjustments.
What a Balanced Adjusted Trial Balance Proves
A balanced adjusted trial balance proves that the adjusting entries were themselves balanced, and that is all. Each carried equal debits and credits, so the columns were always going to agree again whatever the amounts and whichever accounts they hit.
An adjustment nobody made leaves the listing tied, because nothing entered either column. One made for the wrong amount leaves it tied too, because both sides carry the same wrong figure. The general list of errors a tie will never catch is in trial balance; the narrower point is that proving the arithmetic of the adjustments says nothing about whether the right ones were identified.
Where the Adjusted Balances Get Used
They are what an issued statement is checked back against. An auditor’s substantive procedures for the financial statement closing process include agreeing or reconciling information in the financial statements with the underlying accounting records, and examining material journal entries and other adjustments made during the course of preparing the financial statements (AICPA, AU-C section 330, paragraph .21).
Common Questions
The adjusting entries, and nothing else. The unadjusted run is the same listing taken one step earlier, before any period-end entry is booked, and the adjusted run is that listing once those entries are posted. Where both sit relative to the post-closing run is in trial balance.
You do not. Nothing is posted from a trial balance in any of its versions. What gets recorded is each adjusting entry, posted to the ledger like any other, and the listing is then produced from the ledger. The worksheet some preparers lay out between the two runs is a working paper, covered in accounting cycle, and nothing is posted from that either.
By tracing each adjusted balance to the evidence behind it: the accrual to the payroll register or the invoice, the prepaid balance to the policy period, the depreciation to the fixed asset schedule. A reviewer checking a balance is checking that support, not the addition.
Yes. Every adjusting entry carries equal debits and credits, so a listing that tied before them ties after them. A difference means an entry went in unbalanced or landed on the wrong side, and where that search starts is in debit vs credit.
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