Question

A trial balance is not a formal financial statement but is rather one that is used by accountants prior to creating the formal statements to ensure that its debits equal credits. We have learned about two trial balance-the unadjusted trial balance and the adjusted trial balance. Please explain the differences between the two and why we need both.

Answer 1

Difference between adjusted trial balance and unadjusted trial balance

--Adjusted trial balance is the final balance or end-product after all the adjustments have been made. On contrary in the unadjusted trial balance, the entries are not final yet.

--Adjusted trial balance is one wherein all the requisite adjustments of the journal entries were already made to ensure that there is a balance between the two sides – the credit and the debit. On the other hand unadjusted trial balance is usually used before all the journal entries were entered

--Adjusted trial balance depicts the net or loss of income as part of an additional account and helps in the generalization of the report of the account. The unadjusted trial balance will simply enter all the necessary figures

The unadjusted trial balance is required to easily assess accounts that have to change or adjusted before the financial statements are prepared; and thus is needed as the starting point for analyzing account balances and making the adjusting entries. The intent of adjusting entries is to rectify the errors in the initial version of the trial balance and to bring the financial statements of an entity into compliance within an accounting framework