8 Basic steps to prepare the adjusted trial balance

Posted on Nov 23, 2022 at 09:11 PM

The creation of the Adjusted Trial Balance is an integral part of the company's financial statements since, through its preparation, the adjustment and review of the final accounts are made within the company's financial statements list.

As managing the financial division is one of the company's fundamentals, it is a problematic area that needs precision in work, which is precisely why the adjusted trial balance is used.

What is the Adjusted Trial balance?

The adjusted trial balance concept is to review the general ledger and submit adjustments and final accounts so that the financial statements and final accounts are assured in terms of the accuracy of their results and the validity of their content.

The accountant makes this settlement to balance the company's transaction record from one account to another.

Therefore, to prepare the adjusted trial balance, unique methods include consolidating daily book entries into a single series, as preparing this compilation in the sixth phase is within the accounting cycle.

The accounting of adjusted trial balances also relies on double-entry accounting, which has sufficient data on the company's funds and budgets, such as profit flow, existing losses, and a list of funds spent by the company.

What is the difference between the trial balance and the adjusted trial balance?

There is no significant difference to speak about, only a simple one, as they work similarly. one of the most significant differences between them is:

The inventory and reconciliation of accounts in the adjusted trial balance occur at the end of the financial year, requiring many skills, such as financial acumen in decision-making. The usual balance is adjusted and inventoried every monthly cycle.

Adjustments in the adjusted trial balance are more comprehensive, giving final calculations. While the balance of the trial is included in a range of intermediate accounts, such as prepaid expenses, expenses payable, revenue, and many other accounts.

How to do the adjusted trial balance?

The pilot balance needs to be created in many steps, namely:

• Registration of all transactions

Before you start the balancing process for accounts, ensure that there are all transactions for the movement of outgoing and incoming funds, the more valid the registered transactions, the easier the inventory and settlement processes. 

• Running an Initial Review Balance

This step is intended to carry out the unadjusted trial balance process, which helps provide basic financial statements related to the debts and credits of the company, after which the balances for each debt are added to each account. All appropriations are added to each account individually.

Ultimately, the validity of the work is ascertained, and if credits and debts are balanced, the company has a balanced financial account.

• Balance adjustment

Adjustments are made after the completion of the unadjusted trial of balance. All transactions that do not occur within the accounting cycle are removed. Thus, transactions necessary for a specific time are highlighted to increase the accuracy of financial information on the balance sheet.

• Activation of adjusted trial balance

When the necessary adjustments are made, the balance must be specific only to transactions occurring during the accounting cycle.

• Publication of final entries

It is necessary to undertake closure entries, which return the interim accounts to the beginning, before commencing a new accounting cycle. The company's net income is monitored in the new accounting cycle.

In conclusion, Doing adjusted trial balance checks is not easy; it requires financial expertise, and these processes need innovative intelligence and skills, so annual report and financial statements preparation courses in London support you if you want to dive deeper.