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    Monday
    Apr212014

    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 arrive at financial statements. You use the unadjusted trial balance 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.

    If your company creates financial statements on a monthly basis, you would print an unadjusted trial balance at the end of each month to initiate the process of creating financial statements. Alternatively, if your 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, you may simply work from the general ledger report, and adjust it as necessary to create financial statements.

    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.

    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.

    Related Topics

    General journal
    The trial balance
    Trial balance errors
    What is a post-closing trial balance?
    What is an adjusted trial balance?

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