It is worth mentioning that there is one step in the process that a company may or may not include, step 10, reversing entries. Reversing entries reverse an adjusting entry made in a prior period at the start of a new period. We do not cover reversing entries in this chapter, but you might approach the subject in future accounting courses.

• The general purpose of producing a trial balance is to ensure that the entries in a company’s bookkeeping system are mathematically correct.
• If the totals of the two columns do not match each other, it means that there is an error.
• Once all balances are transferred to the unadjusted trial balance, we will sum each of the debit and credit columns.
• Treat the income statement and balance sheet columns like a double-entry accounting system, where if you have a debit on the income statement side, you must have a credit equaling the same amount on the credit side.
• The adjustments total of $2,415 balances in the debit and credit columns.

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When you prepare an adjusted trial balance, you can either:

While you can create an adjusting trial balance manually, or by using spreadsheet software, it’s far easier to do so when using accounting software. Here are some of The Ascent’s top picks for creating an adjusted trial balance. To understand what an adjusted trial balance is, we first have to view an unadjusted trial balance as well as the necessary journal entries to complete in order to prepare an adjusted trial balance. As with all financial reports, trial balances are always prepared with a heading. Typically, the heading consists of three lines containing the company name, name of the trial balance, and date of the reporting period.

Accounting software can perform such tasks as posting the journal entries recorded, preparing trial balances, and preparing financial statements. Students often ask why they need to do all of these steps by hand in their introductory class, particularly if they are never going to be an accountant. If you have never followed the full process from beginning to end, you will never understand how one of your decisions can impact the final numbers that appear on your financial statements. You will not understand how your decisions can affect the outcome of your company.

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Once all balances are transferred to the unadjusted trial balance, we will sum each of the debit and credit columns. The debit and credit columns both total $34,000, which means they are equal and in balance. However, just because the column totals are equal and in balance, we are still not guaranteed that a mistake is not present. Transferring information from T-accounts to the trial balance requires consideration of the final balance in each account. Unearned revenue had a credit balance of $4,000 in the trial
balance column, and a debit adjustment of $600 in the adjustment
column.

When the adjusted trial balance is complete, you are one step closer to reaching the goal of creating a company’s financial statements. Companies initially record their business transactions in bookkeeping accounts within the general ledger. Depending on the kinds of business transactions that have occurred, accounts in the ledgers could have been debited or credited during a given accounting period before they are used in a trial balance worksheet.