Post-Closing Trial Balance

Learning Outcomes

  • Post closing entries and prepare the post-closing trial balance
Step 9. Prepare Post-Closing Trial Balance

After we complete journal entries, we post them to the ledger and then run a post-closing trial balance:

Permanent Accounts                                                                           Temporary Accounts

Two side-by-side T accounts. On the left is the Checking account. There is a debit balance carried forward on January 1st of 14,800 dollars. On May 18th, there is a debit entry of 5,000 dollars. There is a debit entry on June 30th for 2,000 dollars. On September 20th, there's a credit entry for 4,700 dollars and on October 31st, there is a credit entry for 5,000 dollars. There's a debit entry for 6,100 dollars on November 11th. On December 31st, there is a credit entry for 7,400 dollars. There is a total debit balance on December 31st of 10,800 dollars. On the right side is the Service Revenue account. It has a credit balance carried forward of 0 dollars. On May 18th, there is a credit entry of 5,000 dollars. There's a credit entry for2,000 dollars on June 30th. On November 4th, there is a credit entry of 6,100 dollars. On December 31st, there is a total credit balance of 13,100. There is a closing entry adjustment of 13,100 dollars, leaving a total balance on December 31st of 0 dollars.
Two T accounts next to each other. On the left is the Due to Bank account, with a credit balance carried forward on January 1st of 5,000 dollars. On October 31st, there is a debit entry of 5,000 dollars. There is a total balance of 0 dollars on December 31st. On the right side is the Wage Expense Account. It has a balance carried forward on January 1st of 0 dollars. On September 20th, there is a debit entry for 4,700 dollars. There is a total debit balance of 4,700 dollars. On the credit side is closing entry B of 4,700 dollars. On December 31st, there is a total balance of 0 dollars.
Two T accounts side-by-side. On the left is the Owner's Capital account. On January 1st, it has a credit balance carried forward of 9,800 dollars. There is a total credit balance of 9,800 dollars on December 31st before closing entries. Closing entry C is on the credit side, with a value of 8,400 dollars. Closing entry D is on the debit side and has a value of 7,400 dollars. The total credit balance on December 31st after closing entries is 10,800 dollars. On the right side is the Owner Withdrawals account. It has a balance carried forward on January 1st of 0 dollars. On December 31st, there is a debit entry of 7,400 dollars. There is a debit total of 7,400 dollars before closing entries. Closing entry D is on the credit side and has a value of 7,400 dollars. There is a total balance on December 31st of 0 dollars.
A T account of an Income Summary. On the debit side is closing entry B, with a value of 4,700 dollars, as well as closing entry C, with a value of 8,400 dollars. On the credit side is closing entry A, with a value of 13,100 dollars.
Macro Auto Post Closing trial balance as of 12/31/2020. Permanent Accounts: Checking debit of 10,800, Due to Bank no value in debit or credit field, Owner's Capital credit 10,800. Temporary Accounts: Owner Withdrawals no value in debit or credit field, Service Revenue no value in debit or credit field, Wages Expense no value in debit or credit field. Final entry in debit column is 10,800 with a double underline underneath and final entry in credit column is 10,800 with a double underline underneath.

Once we are satisfied that everything is balanced, we carry the balances forward to the new blank pages of the next (now current) year’s ledger and are ready to start posting transactions.

Remember that closing entries are only used in systems using actual bound books made of paper. In any case, they are an important concept and they officially represent the end of the process.

Practice Question

Congratulations! You’ve—almost—completed the accounting cycle.