What is an adjusted trial balance?

An adjusted trial balance lists the general ledger account balances

after any adjustments have been made. These adjustments typically
include those for prepaid and accrued expenses, as well as non-
cash expenses like depreciation. It’s that simple. Prepared at the
end of an accounting period - the end of the financial year - the
adjusted trial balance is reported on a business’s financial
statements, which provide useful information about profits and
losses, cash flow and expenses.

What is the purpose of the adjusted trial balance?

While the definition of the document is relatively straightforward,

you’re probably thinking - what is the purpose of the adjusted trial
balance? Well, the purpose of preparing an adjusted trial balance is
to ensure that the financial statements for the period are accurate
and up-to-date. It corrects any errors to make the statements
compatible with the requirements of an applicable accounting
framework. You can use the report to analyze end-of-period
performance and it is often applied when creating closing entries,
which are journal entries to transfer temporary accounts to
permanent accounts.

Entries in an Adjusted Trial Balance

#1 – Accrual of earned revenue but not yet recorded.
It arises when an asset is a sale, but the customer has not yet billed
for the same. Eg. Account receivable
, accrued interest.

Accrued revenue
A/C – Dr
Revenue A/C- Cr

#2 – Accrual of expenses incurred but not yet recorded.

It is an expense recorded in accounts before the payment is made.

E.g., Interest payable, salaries, and wages payable.
Expense A/C- Dr

Expense payable- Cr

#3 – Prepayments

Prepayment is the setting of payment before its due date. Eg.

Prepaid rent.
Prepaid expense A/C- Dr

Cash A/C- Cr

#4 – Depreciation

Depreciation is a non-cash expense identified to account for the

deterioration of fixed assets to reflect the reduction in useful
economic life.
Adjusted trial balance example

The adjusted trial balance is prepared by following a similar format

to other trial balances. It includes a heading with the company
name, the title of the report and the date of the reporting period at
the top of the page. Three columns are used. The different account
names are listed on the left-hand side, in the first column, and their
debit and credit balances are listed in the second and third columns
respectively. The accounts are listed in order of:
• Assets
• Liabilities
• Equity
• Income
• Expenses

At the bottom of the table, the debit and credit columns are totaled.
To agree with the accounting equation, they must be equal. If the
totals of the two columns do not match each other, it means that
there is an error.

When you prepare an adjusted trial balance, you can either:

• Post the adjusting entries into the ledger account and then
adjust the balances accordingly. You can then take the
adjusted balances and list them on a trial balance.
• Use the unadjusted trial balance, only adding the adjusting
entries to the accounts that are affected by the adjustments.
 Although this method is arguably the easiest, it can only apply
to small businesses with few adjusting entries.

Refer the data given below to prepare an adjusted trial balance −

CBS ltdTrial Balance31-03-2007

Particulars Debit (in Credit (in

rupees) rupees)

Debtor 200000

Salary 35000

Rent 55000

Cash 50000

Sales 250000

Purchases 60000

Furniture 25000

Loan 135000

Creditors 40000
 CBS ltdTrial Balance31-03-2007

Total 425000 425000

Adjustments are made in salary and rent

Salary due = Rs. 55000
Rent (refundable deposit) included = Rs. 30000
Adjusted entries
The adjusted entries are as follows −

Salary account

To balance 35000
b/d

To 55000 By 90000
outstanding balance
salary c/d

90000 90000

Rent account

To 55000 By rent 30000

balance deposited
b/d
 Rent account

By 25000
balance
c/d

55000 55000

Adjusted trial balance

The adjusted trial balance for the given data is as follows −

CBS ltdAdjusted Trial balance31-

03-2007

Particulars Debit (in Credit

rupees) (in
rupees)

Debtor 200000

Salary 90000

Rent 25000

Rent 30000
deposit

Cash 50000

Sales 250000

Purchases 60000
 CBS ltdAdjusted Trial balance31-
03-2007

Furniture 25000

Loan 135000

Creditors 40000

Outstanding 55000
salary

Total 480000 480000

Difference Between Trial Balance and Adjusted Trial Balance

• A trial balance is prepared first, whereas adjusted trial

prepared post-trial balance. Trial balance excludes entries like
accrued expense, accrued revenue, prepayment, and
depreciation, whereas adjusted trial balance includes the same.
• A trial balance is a list of closing balances of ledger account on
a particular point of time. In contrast, adjusted balance is a list
of general account and their balances at a point of time after
the adjusting entries have been posted.
• The Following Balances were taken from the Books of
Mohan Trader as of 28th February 2021.

Balances ₹
Capital 5,00,000

Opening Stock 50,000

Debtors 2,00,000

Machinery 1,00,000

Cash 50,000

Investments 1,00,000

Sales 4,50,000

Purchases 3,00,000

Creditors 50,000

Land 2,00,000

Purchase Return 10,000

Sales Return 6,000

Wages 4,000

• During the month of March 2021, the following

Transactions were Recorded:

Transactions ₹

Goods sold on Credit 1,60,000

Goods Purchase on
1,00,000
Credit

Purchase Return 5,000

Sales Return 4,000

Drawing 10,000

• Prepare Trial Balance for the Month of March 2021

• Solution:
 • TRIAL BALANCE
(As of 31st March 2021)

Debit Credit
Name of Account L.F
Balance Balance

₹ ₹

Capital – 5,00,000

Opening Stock 50,000 –

Debtors
(2,00,000+1,60,000 3,56,000 –
– 4000)

Machinery 1,00,000 –

Cash (50,000-
40,000 –
10,000)

Investments 1,00,000 –

Sales
– 6,10,000
(4,50,000+1,60,000)
Purchases
4,00,000 –
(3,00,000+1,00,000)

Creditors
(50,000+1,00,000 – – 1,45,000
5000)

Land 2,00,000 –

Purchase Return
– 15,000
(5000+5,000)

Sales Return
10,000 –
(6,000+4,000)

Wages 4,000 –

Drawing 10,000 –

Total 12,70,000 12,70,000