Adjusted Trial Balance Definition
Adjusted Trial Balance of the company in the non-financial statement in which the list and the balances of the company’s all the accounts are presented after the adjusting journal entries are made at the year-end and those balances are then reported on respective financial statements.
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In simple words, when accounts are prepared at the end of the accounting period, ledger balances are also required to be updated with relevant adjustments, which are results of the partial transaction, improper transactions, and transactions that were skipped. Such types of transactions are deposits, closing stocks, depreciation, etc. Once all necessary adjustments are made, a new second trial balance is prepared to ensure that it is still balanced. This new trial balance is called the adjusted trial balance.
Its purpose is to be sure that the total amount of debit balance in the general ledger is equal to the total amount of credit balance in the general ledger.
The adjustments are made as below:-
A rent deposit is taken into consideration.An outstanding salary also included in it.
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Hence, the trial balance made includes all considerable adjustments, and this is termed as adjustment trial balance.
How to Prepare Adjusted Trial Balance?
There are two methods for the preparation –
The second method is quite fast and straightforward, but it is not very systematic and usually used by small companies where less adjustment needs to be done. In this adjustment, entries are directly added to the unadjusted trial balance to convert it to an adjusted trial balance.
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Purpose
Hence, it is beneficial in big companies to adjust many entries. It also ensures that entries are done correctly if balances entered into financial statements are incorrect, the financial statements themselves will be inaccurate, and the total must be equal.Any difference indicates that there is some error in entries, ledger, or the calculations. It also helps to monitor the performance of the company as the adjusted trial balance is prepared after considering all adjustments of entries of different accounts. So it gives a clear picture of the performance of the company.
Difference Between Trial Balance and Adjusted Trial Balance
Adjusted Trial Balance Video
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