Adjusted Trial Balance

An adjusted trial balance is prepared after adjusting entries are made and posted to the ledger.

This is the second trial balance prepared in the accounting cycle.

Its purpose is to test the equality between debits and credits after adjusting entries are entered into the books of the company.

To illustrate how it works, here is a sample unadjusted trial balance:

Gray Electronic Repair Services
Unadjusted Trial Balance
December 31, 2014
         
Account Title   Debit   Credit
Cash   $    7,480.00    
Accounts Receivable   3,400.00    
Service Supplies   1,500.00    
Furniture and Fixtures   3,000.00    
Service Equipment   16,000.00    
Accounts Payable       $    9,000.00
Loans Payable       12,000.00
Mr. Gray, Capital       13,200.00
Mr. Gray, Drawing   7,000.00    
Service Revenue       9,550.00
Rent Expense   1,500.00    
Salaries Expense   3,500.00    
Taxes and Licenses   370.00    
Totals   $  43,750.00   $  43,750.00

At the end of the period, the following adjusting entries were made:

Dec 31 Accounts Receivable 300.00  
    Service Revenue   300.00
         
  31 Utilities Expense 1,800.00  
    Utilities Payable   1,800.00
         
  31 Service Supplies Expense 900.00  
    Service Supplies   900.00
         
  31 Depreciation Expense 720.00  
    Accumulated Depreciation   720.00
         

After posting the above entries, the values of some of the items in the unadjusted trial balance will change. Take the first adjusting entry. Accounts Receivable is debited hence is increased by $300. Service Revenue is credited for $300.

The balance of Accounts Receivable is increased to $3,700, i.e. $3,400 unadjusted balance plus $300 adjustment. Service Revenue will now be $9,850 from the unadjusted balance of $9,550.

Next entry. Utilities Expense and Utilities Payable did not have any balance in the unadjusted trial balance. After posting the above entries, they will now appear in the adjusted trial balance.

Third. Service Supplies Expense is debited for $900. Service Supplies is credited for $900. The Service Supplies account had a debit balance of $1,500. After incorporating the $900 credit adjustment, the balance will now be $600 (debit).

And fourth. There were no Depreciation Expense and Accumulated Depreciation in the unadjusted trial balance. Because of the adjusting entry, they will now have a balance of $720 in the adjusted trial balance.

Adjusted Trial Balance Example

After incorporating the adjustments above, the adjusted trial balance would look like this. Just like in the unadjusted trial balance, total debits and total credits should be equal.

Gray Electronic Repair Services
Adjusted Trial Balance
December 31, 2014
         
Account Title   Debit   Credit
Cash   $    7,480.00    
Accounts Receivable   3,700.00    
Service Supplies   600.00    
Furniture and Fixtures   3,000.00    
Service Equipment   16,000.00    
Accumulated Depreciation       $      720.00
Accounts Payable       9,000.00
Utilities Payable       1,800.00
Loans Payable       12,000.00
Mr. Gray, Capital       13,200.00
Mr. Gray, Drawing   7,000.00    
Service Revenue       9,850.00
Rent Expense   1,500.00    
Salaries Expense   3,500.00    
Taxes and Licenses   370.00    
Utilities Expense   1,800.00    
Service Supplies Expense   900.00    
Depreciation Expense   720.00    
Totals   $  46,570.00   $  46,570.00
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