which of the following steps must be completed before preparing the adjusted trial balance? This is a topic that many people are looking for. bluevelvetrestaurant.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, bluevelvetrestaurant.com would like to introduce to you Prepare an Adjusted Trial Balance Statement (Financial Accounting Tutorial #24). Following along are instructions in the video below:
“Welcome back to another presentation. My name is dave and in this tutorial. We re re going to be covering. What is known as an adjusted trial balance so before begin i thought i d actually introduce myself since i have yet to do so and since we re coming up on that 100 video milestone almost i thought it d be a good idea to let you know who i am since we might be having future writers for different subjects at ninja notes.
So now that you know who i am. We can start by talking about this adjusted trial balance. So let s bring up the accounting cycle. And see where we are so we re on step number five.
I m going to kind of outline it right here and we re going to look at a trial balance that i have constructed then we re going to be looking at the adjusting entries that we ve prepared in preceding presentations. The ones that just were previously done. Those is five different categories of adjusting entries and then we re going to prepare on adjusted trial balance. So let s let s get rid of this get rid of our accounting cycle and bring up our trial balance.
So what is a trial balance again well we have all of the accounts listed in our company you have cash inventory. Prepaid expenses accounts payable on our revenue revenue and advertising expenses so these are all the accounts that have balances in our company and of course. The balances of our debits and credits are twelve thousand four hundred dollars each so that our debits equal our credits and of course. This is always a prerequisite and requirement for any trial balance.
The debits must equal the credits and of course. This is because of our double entry accounting system. Where for every transaction. We must have a certain amount of debits for a certain amount of credits.
Where the debits actually equal the credits for every transaction..
So now that we have looked at our original trial balance let s look at those adjusting entries that we created in the preceding presentations. So i ve got the five different categories of adjusted entries that we ve prepared we have prepaid expenses at the top at number one accrued expenses at number two accrued revenues. We have the amortization expense at number four and revenues that have been earned or unearned revenue adjusted entries as number five. So what are we going to do with these adjusting entries well since these adjusting entries were performed after we made this original trial balance.
What we re going to need to do is we re going to need to update the balances of these accounts. If they have been changed or adjusted. And if there are new accounts being created then we have to add on to our trial balance. Any new accounts and create a new adjusted trial balance so the best way to actually find or summarize or compile.
All the new balances and summarize. All the different accounts is to create t accounts. So let s let s get rid of this original trial balance and bring up all the different t accounts that i prepared beforehand before actually talking through this tutorial since i thought it would save it in time. So.
The first t account is of course cash. And as you can see the final balance is unchanged from the beginning. Because adjusted entries do not effect cash accounts. So that is going to be 6500.
Now let s go through the different adjusting entries and see how they affected the balances. So our first one is a prepaid expense adjust entry so we have rent expense being debited for 300 which is right here the left side of course is always debits while the right side is credits on the t accounts so our final balance for rent expenses 300 prepaid rent was credited for 300 so let s find our prepaid expenses. Which are right here the balance originally on our trial balance was 3600. But of course since we adjusted it for a credit of 300 located right here our final balance is going to be a debit of 3300 and no that i ve actually been number next to the different adjustments.
So that you can kind of match them up..
And it s really easy to see you might want to do this on quizzes or tests to really to really observe and make it really easy for you to kind of kind of summarize all the different balances and compile them really easily so let s move on to the second one you have salaries expense. Which is located right here we have no other adjustments so that is the final balance salaries payable did we create we had to create a new account for this so that is the final balance of salaries payable as well next. We have accrued revenue ar was increased by 100 right here it was a debit entry so it has a debit balance of a hundred revenue was adjusted by a hundred as a credit. Which is located right there underneath.
Revenue so accredited a credit amount of 100 was added to the original 2500. Balance and of course. You ll see we ll have a later adjustment in the fifth adjustment entry. But we ll get to that in a sec.
So what else do we need we need to look at amortization expense. Which is right here final balance is five thousand as a debit remember that all expenses are debited. Accumulated amortization are are kind of confusing contra asset accounts. Remember that that is always a credit.
Whenever you increase a contra asset account. And that the final balance. Is five thousand and finally we get to our honored adjusting entry. Which is a debit to unearned revenue.
Which was right here which brings down the unearned revenue final balance to seventy five hundred and ninety dollars as a credit and finally we have revenue being credited once more to give us final balance of twenty six hundred and ten dollars. So right now this has created a really really easy way of looking at all the final balances of all the different accounts. We can see the final bounces are sixty five hundred for cash 100 for accounts evil 2000 for inventory. And so on so.
What are we going to do with these final balances..
We re going to actually create our adjusting braid or adjusted trial. Balance. So let s actually move all this over to the left side. And i m going to bring up the adjust trial balance and we re going to look at how i ve just transposed.
All the final balances over to this adjusted trial balance so as you can see the cash. The final balance is 6500 of the debit. I ve just transpose that balance right over there into the trial or the new adjusted trial. Balance.
Account receivable is 100 right. There inventory. 2000. Lined up right.
There. And so on as we go through the different assets once we hit contour assets. The normal balances of course is a credit. Which would be 5000 and we go through all the liabilities.
And then the revenue and expense accounts. So i ve just taken the final balances and just move them over to the adjusted trial balance and remember that s the order in which we list these goes from assets to liabilities to equity accounts. And just remember that the contour assets. Account of rates here.
The contra asset..
Always sticks with the asset account out of the place you remember that they re kind of like they re kind of like best friends. They always stick together on the balance sheet. They always stick together on the trial balance as well so that s essentially and that s essentially it for creating an adjusted trial balance. It s pretty simple if you take the steps like how i ve how i ve done.
It. And actually go in that order. And compile a new general ledger and take the final balances and transpose them into a new adjusted trial balance. It makes it really easy like that so essentially the adjusted trial balance.
Why we actually construct this is because this gives us an idea of the final balances of all accounts and why this is important is because we need to come up in our next. Step in our accounting cycle. Which is going to be preparing financial statements and then we can pass them out to users. So that they can use them like yourself maybe for investing in the company maybe to a bank.
So that we can apply for a loan or maybe to the cra or the irs. Which is our tax or tax system for actually reporting tax and your income for tax purposes. So that is the point of our adjusted trial balance hopefully i cleared all that up for you and i ll see you guys in the next tutorial when we talk about financial statements. All right see you guys in the next.
One. If you have any questions. We re going to accounting or any of the retiro within our videos you can tweet us at no pirate. You can like us on facebook to receive updates or to share any quick anecdotes about how our videos might have helped and like always thanks for ” .
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