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Post-Closing Trial Balance

The last step in the accounting cycle is to prepare a post-closing trial balance.
A post-closing trial balance is prepared after closing entries are made and posted to the ledger.
It is the third trial balance prepared in the accounting cycle.
For a recap, we have three types of trial balance. They all have the same purpose (i.e. to test the equality
between debits and credits) although they are prepared at different stages in the accounting cycle.
1. Unadjusted trial balance - This is prepared after journalizing transactions and posting them to the
ledger. Its purpose is to test the equality between debits and credits after the recording phase.
2. Adjusted trial balance - This is prepared after adjusting entries are made and posted. Its purpose is to
test the equality between debits and credits after adjusting entries are prepared. It is also the basis in
preparing the financial statements.
An adjusted trial balance contains nominal and real accounts. Nominal accounts are those that are found
in the income statement, and withdrawals. Real accounts are those found in the balance sheet.
3. Post-closing trial balance - This is prepared after closing entries are made. Its purpose is to test the
equality between debits and credits after closing entries are prepared and posted. The post-closing trial
balance contains real accounts only since all nominal accounts have already been closed at this stage.

Example
To illustrate, here is a sample adjusted trial balance:

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

Dec 31 Service Revenue

9,850.00

Income Summary
31 Income Summary

9,850.00
8,790.00

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

31 Income Summary
Mr. Gray, Capital

1,060.00
1,060.00

31 Mr. Gray, Capital

7,000.00

Mr. Gray, Drawing

7,000.00

After posting the above entries, all the nominal accounts would zero-out, hence the term "closing entries".
Let's take a look.
In the first closing entry, Service Revenue was debited. Before that, it had a credit balance of 9,850 as
seen in the adjusted trial balance above. Now its balance would be zero.
Second entry. All expenses were credited. Before that, they had debit balances for the same amounts.
They would now have zero balances.
In the first and second closing entries, the balances of Service Revenue and the various expense
accounts were actually transferred to Income Summary, which is a temporary account. The Income
Summary account would have a credit balance of 1,060 (9,850 credit in the first entry and 8,790 debit in
the second).
Income Summary is then closed to the capital account as shown in the third closing entry.
And finally, in the fourth entry the drawing account is closed to the capital account. At this point, the
balance of the capital account would be 7,260 (13,200 credit balance, plus 1,060 credited in the third
closing entry, and minus 7,000 debited in the fourth entry).

Post-Closing Trial Balance Example


After incorporating the closing entries above, the post-closing trial balance would look like this:

Gray Electronic Repair Services


Post-Closing 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
7,260.00
Totals
$ 30,780.00 $ 30,780.00

The balances of the nominal accounts (income, expense, and withdrawal accounts) have been absorbed
by the capital account Mr. Gray, Capital. Hence, you will not see any nominal account in the postclosing trial balance.
And just like any other trial balance, total debits and total credits should be equal.