At this point in the accounting cycle, you've journalized transactions, posted to the ledger, prepared the unadjusted trial balance, and made necessary adjusting entries. Now it’s time for Step 6: Preparing the Adjusted Trial Balance—a key step that confirms the accuracy of your books before generating financial statements.

  • What is an Adjusted Trial Balance?

An adjusted trial balance is a financial report that lists all ledger account balances after adjusting entries have been made at the end of the accounting period. It ensures that debits still equal credits after adjustments and is the final check before preparing the income statement, balance sheet, and statement of cash flows.

  • In short: it’s a cleaner, more accurate version of the unadjusted trial balance.

=) Purpose of the Adjusted Trial Balance

  • The adjusted trial balance serves several critical functions:

  • Confirms mathematical accuracy after all adjustments are applied

  • Ensures compliance with the accrual basis of accounting

  • Forms the foundation for preparing financial statements

How to Prepare the Adjusted Trial Balance:

1. Start with the Unadjusted Trial Balance
  • Use the list of accounts and balances from Step 4.
2. Apply all Adjusting Entries
  • Update each account by adding or subtracting the adjustments made in Step 5.
3. List Updated Balances
  • For each account, list the new debit or credit balance after adjustments.
4. Total Both Columns
  • Add the debit and credit columns. They must balance—if they don’t, review your adjustments for errors.
5. Double-Check
  • Verify account balances, adjustment accuracy, and correct classification (debit or credit).