Adjusted Trial Balance: Definition, Preparation & Example

One of those steps involves something called an adjusted trial balance. The adjusted trial balance is a report that lists all the accounts of a ... forTeachers forSchools forWorkingScholars® forCollegeCredit Login SignUp Menu forWorkingScholars® forCollegeCredit Plans Plans Courses Courses FindCoursesbySubject Science Math Business Psychology History English SocialScience Humanities Spanish ProfessionalDevelopment ByEducationLevel College HighSchool MiddleSchool TestPrep PopularTests… PopularTests SAT ACT TOEFL GMAT GRE CLEP GED ASVAB RealEstate TeacherCertification… TeacherCertification AEPA CEOE CSET/CBEST FTCE GACE ILTS MTEL MTLE MTTC MoGEA/MEGA NES NYSTCE OAE Praxis RICA TExES VCLA WEST Nursing… NursingTests HESI TEAS NCLEX PAXRN CNE OtherTests… OtherTests AP ASCP ASWB Accuplacer CHSPE CTEL DSST Finance FSA HSPT ISEE MBLEx NCE PERT PHR SHSAT TASC TECEP UExcel Exploreover 4,600 videocourses BrowseAllCourses SAT ACT TOEFL GMAT GRE CLEP GED ASVAB RealEstate AEPA CEOE CSET/CBEST FTCE GACE ILTS MTEL MTLE MTTC MoGEA/MEGA NES NYSTCE OAE Praxis RICA TExES VCLA WEST HESI TEAS NCLEX PAXRN CNE AP ASCP ASWB Accuplacer CHSPE CTEL DSST Finance FSA HSPT ISEE MBLEx NCE PERT PHR SHSAT TASC TECEP UExcel Credit Credit CreditOptions CreditOptions OnlineCollegeCredit HighSchool&GED CertificatesofCompletion HowitWorks TransferCredit TransferCredit AllTransferCredit FindYourSchool CollegeCoursesforCredit TransferringCredit HowItWorks EarnTransferableCredit&GetyourDegreefast Learnmore ContactSupport Copyright LessonTranscript Instructor: RebekiahHill Showbio Rebekiahhastaughtcollegeaccountingandhasamaster'sinbothmanagementandbusiness. Oneoftheimportantstepsintheaccountingcyclewhenpreparingfinancialstatementsistheadjustedtrialbalance.Discovermoreaboutthedefinitionoftheadjustedtrialbalance,includingitspreparationandthetrialbalanceworksheet,andanexampleofthisstepinpractice. Updated:09/29/2021 Createanaccount AdjustedTrialBalance-DefinedHaveyouevernoticedthatnomatterwhatyoudoinlifeitinvolvesaprocess?Thinkaboutit.Youdon'tgetoutofbedinthemorningsdressedandreadyforwork.Youhavetofollowcertainstepstogettothatpoint.Well,accountingisthesameway.Financialstatementsaren'timmediatelypreparedassoonasaccountingbooksareopened.Ittakesaseriesofstepstogettothatpoint.Oneofthosestepsinvolvessomethingcalledanadjustedtrialbalance.Theadjustedtrialbalanceisareportthatlistsalltheaccountsofacompanyandtheirbalancesafteradjustmentshavebeenmade.Iknow,theconceptcanbealittleconfusing,solet'sdivealittledeeperintoitandfigureitallout. Anerroroccurredtryingtoloadthisvideo. Tryrefreshingthepage,orcontactcustomersupport. YoumustcCreateanaccounttocontinue watching Registertoviewthislesson Areyouastudentorateacher? Iamastudent Iamateacher CreateYourAccountToContinueWatching Asamember,you'llalsogetunlimitedaccesstoover84,000 lessonsinmath,English,science,history,andmore.Plus,getpracticetests,quizzes,andpersonalizedcoachingtohelpyou succeed. Getunlimitedaccesstoover84,000lessons. Tryitnow Itonlytakesafewminutestosetupandyoucancancelanytime. Alreadyregistered?Loginherefor access  Back WhatteachersaresayingaboutStudy.com Tryitnow Alreadyregistered? Loginhereforaccess Comingupnext: PreparingFinancialStatements You'reonaroll.Keepupthegoodwork! TakeQuiz Watch NextLesson  Replay Justcheckingin.Areyoustillwatching? Yes!Keepplaying. Yournextlessonwillplayin 10seconds 0:01DefinitionofAdjusted… 0:45TrialBalanceto… 1:51PreparingtheWorksheet 5:16LessonSummary Save Save Save Wanttowatchthisagainlater? LoginorsignuptoaddthislessontoaCustomCourse. LoginorSignup Timeline Autoplay Autoplay Speed Speed 27Kviews Video Quiz Course 27K views TrialBalancetoAdjustedTrialBalanceOk.Soyouknowthetextbookdefinitionoftheadjustedtrialbalance,butwhatisitinlayman'sterms,andhowdoyoucreateone?Well,letmestartbytakingastepbackintheaccountingprocessandtalkingaboutthetrialbalance.Thetrialbalanceisalistingofacompany'saccountsandtheirbalancesafterallthetransactionsofanaccountingperiodhavebeenrecorded.Someofthecompany'saccountswillneedtohaveanadjustingentrymade.Adjustingentriesarejournalentriesthataremadeonthelastdayoftheaccountingperiodthatbringthebalancesofspecificaccountsuptodateandmakesurethatallaccountbalancesconformtotheprinciplesoftheaccrualbasisaccountingmethod.Theaccrualbasisaccountingmethodisthemethodofaccountingthatrecognizesrevenuewhenitisearnedandexpenseswhentheyareincurredregardlessofwhencashisreceivedorpaidout.Beforeanyadjustingentriesaremade,accountantswillprepareamultiplecolumnworksheet.Thisworksheetallowsthepersonpreparingjournalentriestopencilintheneededadjustmentsandmakesurethatthetotalofalldebitandcreditbalancesstilladdupafteradjustmentshavebeenmade.PreparingtheWorksheetThebestwaytoexplainhowtoprepareanadjustedtrialbalanceistojustwalkyouthroughone. Adjustedtrialbalanceworksheet Jimmyisthecomptrollerofasmallmanufacturingfirm.Itistimeforhimtobegingettinginformationreadytopreparehiscompany'squarterlyfinancialstatements.Jimmyknowsthatallthetransactionsforthequarterhavebeenjournalizedandposted,sohecancreatehistrialbalancereportandstartworkingontheworksheetforanyadjustments.Thefirsttwocolumnsaretheaccountbalancesofthecompanyafteralltransactionshavebeenposted.Thesenumberscomedirectlyfromthebalancesthatappearinthegeneralledger.Thesecondtwocolumnsshowtheadjustmentsthathavebeenmadetoafewaccounts.Let'stakealittletimetolookattheadjustedaccounts.ThefirstthingthatJimdoesistolookatthesuppliesaccount.Heknowsthatforthisaccountingperiod,thecompanyusedup$18,480worthofsupplies.Tomakesurethatheaccountsforthatandreflectsthecorrectbalanceonthefinancialstatements,hewillhavetoadjustthesuppliesaccountwithacreditof$18,480andthesuppliesexpenseaccountwithadebitof$18,480.Hereiswhatthejournalentrylooslike: Account debit credit Suppliesexpense $18,480 Supplies $18480 Thisentrywillshowupintheadjustmentscolumnoftheworksheet.Theendresultisadecreaseinthesuppliesaccountandanincreaseinthesuppliesexpenseaccountbalances.Thistakescareofthecostofsuppliesusedbythecompanyduringthisaccountingperiod.Thesecondaccountthatneedsattentionistheprepaidrentaccount.Atthebeginningoftheyear,thecompanypaid6month'srentonastoragewarehousethattheyuse.Sincethecompanyproducesquarterlyfinancialstatements,thetimeaccountedforineachaccountingperiodis3months.Jimknowsthatofthe6month'sprepaidrent,thecompanyhasusedup3months,orhalf,oftheprepayment.Toaccountforthis,hehastomakeanadjustmenttotheprepaidrentandtherentexpenseaccount.Hecreditsprepaidrentintheamountof$12,000,whichishalfoftheprepaymentanddebitstherentexpenseaccountinthesameamount.Again,thebalancesinthetwoaccountswillchangeasaresultoftheadjustment.Thejournalentrylookslikethis: Account debit credit Rentexpense $12,000 Prepaidrent $12,000 ThethirdthingthatJimdoesistoexamineanydepreciationofequipmentthathasoccurredovertheaccountingperiod.Hecomputesthedepreciationandmakestheneededadjustment.Forthistimeperiod,thereisdepreciationintheamountof$1100.00.Jimadjuststheaccumulateddepreciationaccountbycreditingthataccount$1100anddebitingthedepreciationexpenseaccountinthesameamount. Account debit credit Depreciationexpense $1,100 Accumulateddepreciation $1,100 ThelastadjustmentthatJimhastomakeisintheinterestaccounts.Sincethecompanyhasaloanthatisclassifiedinnotespayable,thatloanaccruesinterest.Toaccountfortheinterestthathasaccruedinthisaccountingperiod,Jimcalculatesthe3monthsinterest.Thatinterestisonly$150.Hemakesanadjustmenttotheinterestpayableaccountbycreditingtheaccount$150.Hethenturnsaroundandmakesanadjustmenttotheinterestexpenseaccountforthesameamount. Account debit credit Interestexpense $150 Interestpayable $150 NowtheamountsinthesejournalentriescanbeenteredintheworksheetunderAdjustments,hearshowitlooks: WhenJimisfinished,hecalculatesthenewbalancesoftheaccountsandenterstheminthelasttwocolumnsontheworksheet.Heisnowreadytousethisinformationtohelpcreatethefinancialstatements.LessonSummaryThemaingoaloftheaccountingprocessistocreateaccuratefinancialstatements.Inordertoreachthisgoal,thereareanumberofstepsthatmustbecompleted.Oneofthosestepsistocreateanadjustedtrialbalance.Anadjustedtrialbalanceisareportthatlistsalltheaccountsofacompanyandtheirbalancesafteradjustmentshavebeenmade.Theadjustedtrialbalanceiscreatedonamulticolumnworksheet.Thefirsttwocolumnsoftheworksheetcontaininformationfromthetrialbalance.Thetrialbalanceisalistingofacompany'saccountsandtheirbalancesafteralltransactionsofanaccountingperiodhavebeenrecorded.Someofthecompanyaccountswillnotadequatelyreflecttheirtruebalanceatthetime,andadjustmentswillneedtobemade.Theseadjustments,calledadjustingentries,arejournalentriesthataremadeonthelastdayoftheaccountingperiodthatbringsthebalancesofspecificaccountsuptodateandmakessurethatallaccountbalancesconformtotheprinciplesoftheaccrualbasisaccountingmethod.Theaccrualbasisaccountingmethodisthemethodofaccountingthatrecognizesrevenuewhenitisearnedandexpenseswhentheyareincurredregardlessofwhencashisreceivedorpaidout.Adjustmentsareenteredintothemiddletwocolumnsoftheworksheet.Onceadjustmentshavebeenentered,theaccountbalancesarerecalculated,andthefinalandmostaccuratebalancesareenteredintothelasttwocolumnsoftheworksheet.Whentheadjustedtrialbalanceiscomplete,youareonestepclosertoreachingthegoalofcreatingacompany'sfinancialstatements.LearningOutcomesAfteryou'vereviewedthisvideolesson,youshouldbeableto: Identifythemaingoaloftheaccountingprocessanddefineaccrualbasisaccountingmethod Defineadjustedtrialbalanceandexplainhowtocreateone Describewhatthetrialbalanceandadjustingentriesare TounlockthislessonyoumustbeaStudy.comMember. Createyouraccount Registertoviewthislesson Areyouastudentorateacher? Iamastudent Iamateacher UnlockYourEducation Seeforyourselfwhy30millionpeopleuseStudy.com BecomeaStudy.commemberandstartlearningnow. BecomeaMember Alreadyamember?LogIn  Back WhatteachersaresayingaboutStudy.com Tryitnow Alreadyregistered? Loginhereforaccess Createanaccount AdjustedTrialBalance:Definition,Preparation&Example Starttoday.Tryitnow Business / Accounting101:FinancialAccounting Accounting101:FinancialAccounting 14chapters| 138lessons |13 flashcardsets {{courseNav.course.topics.length}}chapters| {{courseNav.course.mDynamicIntFields.lessonCount}}lessons |{{course.flashcardSetCount}} flashcardset{{course.flashcardSetCoun>1?'s':''}} Ch1. IntroductiontoAccounting Goto IntroductiontoAccounting Ch2. FinancialStatementsin... Goto FinancialStatementsinAccounting Ch3. MechanicsoftheAccounting... Goto MechanicsoftheAccountingCycle Ch4. AdjustingAccountsandPreparingFinancialStatements PeriodicReporting&theTimePeriodPrinciple 4:33 UsingAccrualAccountingtoMakeFinancialStatementsMoreUseful 5:47 TheDifferencesBetweenAccrual&Cash-BasisAccounting 6:20 AccountAdjustments:Types,Purpose&TheirLinktoFinancialStatements 9:00 AccruedExpenses&Revenues:Definition&Examples 4:30 AdjustedTrialBalance:Definition,Preparation&Example 6:43 7:35 NextLesson PreparingFinancialStatements Temporary&PermanentAccounts:Definition&Differences 4:57 ClosingEntries:Process,MajorSteps,Purpose&Objectives 8:25 RealAccountsvs.NominalAccounts:Definition,Differences&Examples 4:55 Post-ClosingTrialBalance:Preparation&Purpose 3:14 Goto AdjustingAccountsandPreparingFinancialStatements Ch5. InternalControlsinAccounting Goto InternalControlsinAccounting Ch6. MerchandisingOperationsandInventory... Goto MerchandisingOperationsandInventoryinAccounting Ch7. ReceivablesinAccounting Goto ReceivablesinAccounting Ch8. CompletingtheOperatingCyclein... Goto CompletingtheOperatingCycleinAccounting Ch9. Long-TermAssetsinAccounting Goto Long-TermAssetsinAccounting Ch10. CurrentandLong-TermLiabilitiesin... Goto CurrentandLong-TermLiabilitiesinAccounting Ch11. Reporting&AnalyzingEquityin... Goto Reporting&AnalyzingEquityinAccounting Ch12. StatementofCashFlowsin... Goto StatementofCashFlowsinAccounting Ch13. FinancialStatementAnalysisin... Goto FinancialStatementAnalysisinAccounting Ch14. 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OnNovember1,2014,thefollowingweretheaccountbalancesofRijoEquipmentRepair.Debit CreditCash $2,790 AccumulatedDepreciation-Equipment $500AccountsReceivable 2,910 AccountsPayable 2,3 TUCKERBOATSStep#1:Creategeneraljournalentriesforaseriesof31eventsandpostthemtothegeneralledgerintheformofT-accounts.Step#2:PrepareanunadjustedTrialBalance.Step#3:At ThegeneralledgerofRedStormCleanersatJanuary1,2015,includesthefollowingaccountbalances:Accounts Debits CreditsCash $14,000 AccountsReceivable 6,800 Supplies 2,800 Equipment 16,000 JacksonvilleFinancialServiceCo.whichspecializesinappliancerepairserviceisownedandoperatedbyCindyLatty.JacksonvilleFanancialservicecompantaccountingclerk.Preparetheunadjustedt Thedataneededtodetermineyear-endadjustmentsareasfollows:a.Depreciationofbuildingfortheyear,$6,400.b.Depreciationofequipmentfortheyear,$2,800.c.Accru Createanaccounttostartthiscoursetoday Usedbyover30millionstudentsworldwide Createanaccount Likethislesson Share Exploreourlibraryofover84,000 lessons Search Browse Browsebysubject CollegeCourses Business English ForeignLanguage History Humanities Math Science SocialScience SeeAllCollegeCourses HighSchoolCourses AP CommonCore GED HighSchool SeeAllHighSchoolCourses OtherCourses College&CareerGuidanceCourses CollegePlacementExams EntranceExams GeneralTestPrep K-8Courses SkillsCourses TeacherCertificationExams SeeAllOtherCourses Upgradetoenroll × Enrollinginacourseletsyouearnprogressbypassingquizzesandexams. 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