Question

Adjusting trial balance sheet

Answer 1

Preparing Adjusting Trial Balance

Accounting Cycle
1. Analyze Transactions	5. Prepare Adjusting Journal Entries
2. Prepare Journal Entries	6. Post Adjusting Journal Entries
3. Post journal Entries	7. Prepare Adjusted Trial Balance
4. Prepare Unadjusted Trial Balance	8. Prepare Financial Statements

9. Prepare Closing Entries                                                                                       10. Post Closing Entries

11. Prepare Post-Closing Trial Balance

In our detailed accounting cycle, we just finished step 5 preparing adjusting journal entries. The next step is to post the adjusting journal entries. We will use the same method of posting (ledger card or T-accounts) we used for step 3 as we are just updating the balances. Remember, you do not change your journal entries for posting — if you debit in an entry you debit when you post. After we post the adjusting entries, it is necessary to check our work and prepare an adjusted trial balance.

Let’s take an Practical Example for better Understanding.

The unadjusted trial balance is as follows:

	Debit	Credit
Cash	10,000
Accounts Receivable	20,000
Supplies	8,500
Prepaid Insurance	2,400
Trucks	40,000
Accounts Payable		25,000
Unearned Revenue		4,500
Common Stock		35,000
Retained Earnings		6,100
Service Revenue		30,000
Salaries Expense	18,000
Rent Expense	1,200
Utilities Expense	500
TOTALS	100,600	100,600

The adjusting entries from the previous examples are:

		Debit	Credit
1) Dec 31	Accounts Receivable	5,000
	Service Revenue		5,000
	To record December accrued revenue.
2) Dec 31	Interest Receivable	600
	Interest Revenue		600
	To record December accrued interest revenue.
3) Dec 31	Salaries Expense	360
	Salaries Payable		360
	To record salaries earned but not paid.
4) Dec 31	Unearned Revenue	1,500
	Service Revenue		1,500
	To record deferred revenue now earned.
5) Dec 31	Insurance Expense	200
	Prepaid Insurance		200
	To record one month of insurance expired.
6) Dec 31	Supplies expense	7,000
	Supplies		7,000
	To record supplies used.
7) Dec 31	Depreciation Expense	750
	Accumulated Depreciation – Trucks		750
	To record one month of depreciation.

We can post these transactions using T-accounts or ledger cards. We are using the same posting accounts as we did for the unadjusted trial balance just adding on. Notice how we start with the unadjusted trial balance in each account and add any debits on the left and any credits on the right.

Once the posting is complete and the new balances have been calculated, we prepare the adjusted trial balance. As before, the adjusted trial balance is a listing of all accounts with the ending balances and in this case it would be adjusted balances.

	Debit	Credit
Cash	10,000
Accounts Receivable	25,000
Interest Receivable	600
Supplies	1,500
Prepaid Insurance	2,200
Trucks	40,000
Accum. Depreciation-Trucks		750
Accounts Payable		25,000
Unearned Revenue		3,000
Salaries Payable		360
Common Stock		35,000
Retained Earnings		6,100
Service Revenue		36,500
Interest Revenue		600
Salaries Expense	18,360
Rent Expense	1,200
Utilities Expense	500
Insurance Expense	200
Supplies Expense	7,000
Depreciation Expense	750
TOTALS	107,310	107,310