A post-closing trial balance is a statement that is a statement of all balance sheet accounts having a balance of greater than zero at the end of a reporting period.
By the use of the post-closing trial balance, one may be certain that the total of all debit balances is equal to the total of all credit balances, which should result in a net of zero. Because temporary accounts were closed and their totals were transferred to retained earnings as part of the closure operation. So, revenue, cost, gain, and loss account balances are missing from the post-closing trial balance. This is because the sums of these accounts were transferred to retained earnings.
If revenue exceeds expenses, there is a profit and it leads to increase in total equity figure. On the other hand, if expenses exceed revenue, it’s a loss and total equity is decreased when the loss is adjusted in the equity balance.
Following are some of the characteristics of the post-closing trial balance.
All Debits and Credits become Equal
After the accountant has ensured that the sum of all debits and credits contained in the report is the same, they must first set a flag that prevents any further transactions from being recorded in the preceding accounting period. Next, the accountant must begin entering accounting transactions for the succeeding accounting period after making sure that the total of all debits and credits contained in the report is the same. This is one of the last stages in the process of shutting up shop at the end of the period.
If there is any revenue, expense, gain, loss, or summary account balances, these are shown in the trial balance as they need to be carried forward as retained earnings.
After the end of the accounting period, the trial balance includes columns for the account number, account description, debit balance, and credit balance.
As a result of the infrequency with which the expression “Post Closing Trial Balance” is called upon in accounting software, its inclusion in the header is very improbable, the report heading that is customarily used, “Trial Balance,” is utilized.
Since accounting software requires all journal entries to be balanced before allowing them to be sent to the main ledger, it is nearly unheard of to have a trial balance that is not balanced.
Example of a Post-closing trial balance.
The name of the company, the title “Trial Balance,” and the date the account balances were taken must all be included in the header of the post-closing trial balance. After the header, you will most likely see the account number, account name, debit balance amount, and credit balance amount.
The total amount of each account is shown in the column designated for either debits or credits. After this, the remaining general ledger balance sheet accounts are revealed, except for the accounts that have a balance of 0.00 dollars.
At the very bottom of each row, you’ll see the sums that represent the debit and credit balance columns combined. When using accounting software, the quantities that you enter must remain consistent at all times. The trial balance with final figures is used to prepare financial statement.