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