Unadjusted trial balance definition
/What is an Unadjusted Trial Balance?
The unadjusted trial balance is the listing of general ledger account balances at the end of a reporting period, before any adjusting entries are made to the balances to create financial statements. The unadjusted trial balance is used as the starting point for analyzing account balances and making adjusting entries. This report is a standard one that can be issued by many accounting software packages. It can also be manually compiled.
How is an Unadjusted Trial Balance Prepared?
If a company creates financial statements on a monthly basis, the accountant would print an unadjusted trial balance at the end of each month to initiate the process of creating financial statements. Alternatively, if the company only creates financial statements once a quarter, you would print the unadjusted trial balance on a quarterly basis.
In a computerized accounting system, it may not even be apparent that an unadjusted trial balance is available; instead, the accountant may simply work from the general ledger report, and adjust it as necessary to create financial statements.
When to Use an Unadjusted Trial Balance
An unadjusted trial balance is only used in double entry bookkeeping, where all account entries must balance. If a single entry system is used, it is not possible to create a trial balance where the sum of all debits equals the sum of all credits. Instead, a person using a single entry system might compile entries on a spreadsheet, or even in a checkbook.
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Example of a Trial Balance
In the following example, the unadjusted trial balance is the first column of numbers, while the second column of numbers contains an adjusting entry; the final column combines the first two columns, creating the adjusted trial balance. Debit balances (for assets and expenses) are listed as positive numbers, and credit balances (for liabilities, equity, and revenue) as negative numbers; the debits and credits exactly offset each other, so the total always equals zero.
In an alternative format, the unadjusted trial balance may have a separate column for all debit balances and a separate column for all credit balances. This is useful for ensuring that the total of all debits equals the total of all credits.
ABC Company
Trial Balance
June 30, 20XX
| Unadjusted Trial Balance |
Adjusting Entries |
Adjusted Trial Balance |
|
| Cash | $60,000 | $60,000 | |
| Accounts receivable | 180,000 | 180,000 | |
| Inventory | 300,000 | 300,000 | |
| Fixed assets (net) | 210,000 | 210,000 | |
| Accounts payable | (90,000) | (90,000) | |
| Accrued liabilities | (50,000) | $(25,000) | (75,000) |
| Notes payable | (420,000) | (420,000) | |
| Equity | (350,000) | (350,000) | |
| Revenue | (400,000) | (400,000) | |
| Cost of goods sold | 290,000 | 290,000 | |
| Salaries | 200,000 | 25,000 | 225,000 |
| Payroll taxes | 20,000 | 20,000 | |
| Rent | 35,000 | 35,000< | |
| Other expenses | 15,000 | 15,000 | |
| Total | $0 | $0 | $0 |
The adjusting entry in the example is for the accrual of salaries that were unpaid as of the end of June.