Some of the following accounts which appear on a post-closing trial balance on either the debit or credit section when you make your financial year-end reports may include:
- accounts payable (credit)
- cash (debit)
- retained earnings (credit)
- unearned revenue (credit)
- salaries payable or wages payable (credit)
- accounts receivable (debit)
- interest receivable (debit)
- equipment (debit)
- office supplies (debit)
- prepaid rent (debit)
- accumulated depreciation: equipment (credit)
- common stock (credit)
- inventory (debit)
- accrued expenses (credit)
- fixed assets (debit)
Typically, salary and wages payable and other types of remaining owed expenses end up categorized as liabilities. Of course, current liabilities are those that must be paid within a year, while long-term liabilities can be paid after a year. On the other hand, cash and money generating properties, such as equipment, end up being categorized as assets at the end of each accounting cycle; accumulated depreciation gets classified as a contra-asset.
So, ensuring that the values in the post-closing t-accounts are accurately reflected, the post-closing trial balance is necessary to help you balance the company books since you cannot submit any more adjusting entries later.
What Is a Post-Closing Trial Balance?
A post-closing trial balance lists every account that contains a balance after the close of the accounting period for a business. According to Libretexts.org, it is meant to ensure that both the debit balances and credit balances, which you make in journal entries, are equal.
In addition, a post-closing trial balance verifies that the accounts with balances after closing entries are made are permanent accounts. Further, Penn State Press Books states that its preparation is similar to the one for adjusted trial balances and unadjusted trial balances.
The accounting cycle typically closes when the accountant records all financial entries in the general ledger and the financial statements are prepared.
Also, the accounting balances contained in the post-closing trial balance are usually the closing entries of one cycle but represent the beginning balances for the following period. These accounts only include balance sheet accounts and not accounts that carry a zero balance.
Which Accounts Don’t Appear on a Post-Closing Trial Balance?
The general rule of thumb is that temporary accounts or nominal accounts in ledger accounts, do not carry a balance at the end of the period and thus, do not appear on the post-closing trial balance.
Also, the revenue, expense, income summary and owner's drawing accounts will not appear on a post-closing trial balance since these accounts will not carry a balance after the accounting cycle has ended.
Revenue accounts represent temporary income statement accounts. These accounts accumulate the money earned during the period and start fresh each period. Revenues include professional service fees or merchandise sales.
Since the revenues start fresh each period, the accountant finds the balance for each revenue account and posts it in the income statement. Revenue accounts do not appear on the post-closing trial balance.
Expense accounts, such as rent expenses or utilities expense, also represent temporary income statement accounts. These accounts accumulate the expenses incurred during the period and start fresh each period. This allows the company to consider only the expenses used during the current period.
As the accountant prepares the income statement, they use the expense balances from the accounting records. Since the expenses start fresh each accounting period, the accountant only needs to find the account balance. Expense accounts do not appear on the post-closing trial balance.
The Income Summary Account
The income summary account with a gain or loss only appears during the closing process and never carries a balance. The accountant closes out both the revenue account balances and the expense account balances, such as advertising expense, supplies expense, etc., to the income summary. They then close the income summary out to the owner's capital account or retained earnings account.
The purpose of the income summary account is to just facilitate the closing process, so it does not appear on the post-closing trial balance.
The Owner's Drawing Account
The owner’s drawing account represents money taken from the business and used by the owner (also referred to as the owner’s withdrawals). This account only accumulates withdrawals during the period and starts each new period with a zero balance.
At the end of the accounting period, the accountant closes this account to the owner’s capital account. The balance of this account prior to closing appears on the statement of owner’s equity. The owner’s drawing account does not appear on the post-closing trial balance.
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