Post Closing Trial Balance Flashcards, test questions and answers

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What is Post Closing Trial Balance?

A Post Closing Trial Balance is a financial statement used by businesses to summarize the ending balances of their accounts after all closing entries have been made. It is useful for verifying that all debits equal credits and that the accounting equation remains in balance. The post-closing trial balance is the first step in a new accounting period. It lists all of the permanent accounts, which are those accounts whose balances will carry over into the next period, such as Cash, Accounts Receivable, Supplies, and so on. Temporary accounts like Revenue, Expenses, and Dividends will not be included. In order to prepare a post-closing trial balance properly, a business must first make sure all closing entries are complete and accurate according to Generally Accepted Accounting Principles (GAAP). Once this has been done, the business must then record account balances as they were at the end of the accounting period prior to any adjustments or closing entries. This allows for verification that all debits equal credits and that no double entry has been made in error when recording data between periods. The post-closing trial balance can be used to check for errors before beginning with new transactions in a new accounting period. Any discrepancies between debits and credits should be immediately investigated before continuing with journal entries for the next period. Auditors may also request copies of this document during an audit process if there is any suspicion of fraud or mismanagement within an organization’s financial records. In conclusion, a post-closing trial balance is an important element used during financial reporting processes as it helps ensure accuracy when transferring data from one accounting period to another while also serving as proof of accuracy when requested by auditors or other stakeholders requiring transparency into an organization’s finances.