7.4 Adjusted Trial Balance
Key Takeaways
- The adjusted trial balance lists all general ledger accounts and balances after adjusting entries have been journalized and posted.
- TR trial balance types candidates must distinguish include the unadjusted (preliminary) trial balance, the adjusted trial balance, and later the post-closing trial balance.
- Debit totals must still equal credit totals on the adjusted TB; equality proves arithmetic balance after adjustments, not that every adjustment was conceptually correct.
- The adjusted trial balance is the direct bridge into the worksheet columns and the preparation of the income statement, statement of changes in equity, and balance sheet.
7.4 Adjusted Trial Balance
Quick Answer: An adjusted trial balance (ATB) is prepared after adjusting journal entries are posted. It is one of the TR-relevant trial balance types—alongside the unadjusted/preliminary trial balance and, after closing, the post-closing trial balance. Equal debit and credit totals on the ATB feed the worksheet and the financial statements.
Chapter 6 built the unadjusted trial balance from ledger balances before adjustments. Chapter 7’s earlier sections created the missing accrual, deferral, depreciation, and bad-debt entries. This section completes HCS412303’s “prepare trial balance” story for the mid-cycle checkpoint: prove the books again after adjustments.
Trial Balance Types in the Cycle
| Type | When prepared | What it includes | Primary use |
|---|---|---|---|
| Unadjusted (preliminary) TB | After posting routine transactions | Pre-adjustment balances | Catch posting/math errors; start adjustments |
| Adjusted TB | After posting adjusting entries | All accounts at report-ready amounts | Worksheet & financial statements |
| Post-closing TB | After closing entries | Permanent accounts only | Prove books ready for next period |
TESDA candidates who can only prepare one TB often freeze when the practical packet asks for both unadjusted and adjusted columns on a worksheet. Name the type by timing, not by whether debits equal credits (all proper TBs must balance).
Step-by-Step: From Adjustments to ATB
- Complete all adjusting entries in the general journal (Sections 7.1–7.3).
- Post each adjustment to the general ledger (and subsidiaries if AR/AP detail changed).
- Foot and balance every affected ledger account.
- List all accounts with non-zero balances (and often zero-balance accounts if the worksheet format requires a full chart order).
- Enter debit or credit balances in ATB columns.
- Total both columns; investigate if unequal.
- Carry ATB figures into worksheet Income Statement and Balance Sheet columns (Chapter 8).
Worked Example — Compact Philippine ATB bridge
Unadjusted trial balance (excerpt) — Isla Services, 31 Dec 2026:
| Account | Debit | Credit |
|---|---|---|
| Cash | ₱95,000 | |
| Accounts Receivable | ₱40,000 | |
| Supplies | ₱11,500 | |
| Prepaid Insurance | ₱36,000 | |
| Equipment | ₱200,000 | |
| Accumulated Depreciation — Equipment | ₱40,000 | |
| Accounts Payable | ₱22,000 | |
| Unearned Service Income | ₱60,000 | |
| Isla, Capital | ₱180,000 | |
| Service Income | ₱310,000 | |
| Salaries Expense | ₱140,000 | |
| Rent Expense | ₱48,000 | |
| Utilities Expense | ₱21,500 | |
| Totals | ₱592,000 | ₱592,000 |
Adjustments summarized:
| Adj | Description | Entry |
|---|---|---|
| (a) | Supplies used ₱7,300 | Dr Supplies Expense ₱7,300; Cr Supplies ₱7,300 |
| (b) | Insurance expired ₱9,000 | Dr Insurance Expense ₱9,000; Cr Prepaid Insurance ₱9,000 |
| (c) | Services earned from unearned ₱20,000 | Dr Unearned Service Income ₱20,000; Cr Service Income ₱20,000 |
| (d) | Depreciation ₱20,000 | Dr Depreciation Expense ₱20,000; Cr Accum. Dep. ₱20,000 |
| (e) | Accrued salaries ₱8,000 | Dr Salaries Expense ₱8,000; Cr Salaries Payable ₱8,000 |
| (f) | Accrued utilities ₱1,500 | Dr Utilities Expense ₱1,500; Cr Utilities Payable ₱1,500 |
| (g) | Bad debts estimate ₱2,000 | Dr Bad Debts Expense ₱2,000; Cr Allowance for Doubtful Accounts ₱2,000 |
Adjusted trial balance (excerpt after posting):
| Account | Debit | Credit |
|---|---|---|
| Cash | ₱95,000 | |
| Accounts Receivable | ₱40,000 | |
| Allowance for Doubtful Accounts | ₱2,000 | |
| Supplies | ₱4,200 | |
| Prepaid Insurance | ₱27,000 | |
| Equipment | ₱200,000 | |
| Accumulated Depreciation — Equipment | ₱60,000 | |
| Accounts Payable | ₱22,000 | |
| Salaries Payable | ₱8,000 | |
| Utilities Payable | ₱1,500 | |
| Unearned Service Income | ₱40,000 | |
| Isla, Capital | ₱180,000 | |
| Service Income | ₱330,000 | |
| Salaries Expense | ₱148,000 | |
| Rent Expense | ₱48,000 | |
| Utilities Expense | ₱23,000 | |
| Supplies Expense | ₱7,300 | |
| Insurance Expense | ₱9,000 | |
| Depreciation Expense | ₱20,000 | |
| Bad Debts Expense | ₱2,000 | |
| Totals | ₱623,500 | ₱623,500 |
Trace a few lines so the logic sticks:
- Supplies: ₱11,500 − ₱7,300 = ₱4,200
- Prepaid Insurance: ₱36,000 − ₱9,000 = ₱27,000
- Service Income: ₱310,000 + ₱20,000 = ₱330,000
- Accumulated Depreciation: ₱40,000 + ₱20,000 = ₱60,000
- New accounts appear: Supplies Expense, Insurance Expense, Depreciation Expense, Bad Debts Expense, Salaries Payable, Utilities Payable, Allowance for Doubtful Accounts
Proving the Adjusted Trial Balance
Same diagnostic habits as Chapter 6 apply if columns do not equal:
| Symptom | Likely cause |
|---|---|
| Difference divisible by 9 | Transposition when copying an adjusted balance |
| Difference equals an adjustment amount | Posted adjustment to one side only |
| ATB equals unadjusted TB exactly | Adjustments journalized but never posted |
| Missing expense accounts that adjustments created | Omitted new titles from the ATB list |
Equality means the ledger is in balance after adjustments. It does not guarantee you chose the correct prepaid method or computed depreciation properly—conceptual review still matters.
Bridge to Worksheet and Financial Statements
On a 10-column or similar worksheet (Chapter 8):
- Unadjusted TB columns ← Chapter 6 balances
- Adjustments columns ← Chapter 7 entries
- Adjusted TB columns ← extend each line (or transfer from standalone ATB)
- Income Statement columns ← temporary accounts from ATB
- Balance Sheet columns ← permanent accounts from ATB
Net income from the income statement columns links to equity on the balance sheet side. Without a correct ATB, HCS412304 performance criteria for income statement, changes in equity, and statement of financial position inherit errors.
Account sorting from ATB to statements
| ATB accounts | Financial statement |
|---|---|
| Service Income, expenses (including depreciation & bad debts) | Income Statement |
| Capital, drawings, net income link | Statement of Changes in Equity |
| Assets, contra-assets, liabilities, ending capital | Balance Sheet |
Assessment-Day Habits
- Label the schedule "Adjusted Trial Balance" with entity name and date.
- Keep chart-of-accounts order (assets → liabilities → equity → income → expenses) unless the center’s form dictates otherwise.
- Show pesos with clear debit/credit columns; rule totals.
- Cross-check that every adjusting entry’s accounts appear with updated amounts.
- Carry ATB totals to the worksheet before drafting formal statements.
Common Errors
- Preparing only one TB and calling it adjusted when no adjustments were posted.
- Dropping contra-asset accounts from the ATB.
- Leaving Unearned Income at the pre-adjustment credit after earning a portion.
- Placing adjusted expense balances in the credit column.
- Starting financial statements from the unadjusted TB and “mentally” adjusting—assessors want an audit trail.
Chapter 7 Close
You can now:
- Accrue expenses and revenues (7.1)
- Adjust deferrals under both asset/liability and expense/revenue methods (7.2)
- Record straight-line depreciation and allowance/direct write-off bad debts (7.3)
- Post adjustments and prepare the adjusted trial balance as a distinct TB type bridging to worksheets and financial reports (7.4)
Chapter 8 picks up at the worksheet and the formal financial statements that consume these adjusted balances.
When is the adjusted trial balance prepared in the accounting cycle?
Which set correctly lists trial balance types a Bookkeeping NC III candidate should distinguish across the cycle?
On the unadjusted TB, Prepaid Insurance is ₱36,000. Adjustment (b) credits Prepaid Insurance ₱9,000 for expired coverage. What prepaid amount appears on the adjusted trial balance?
What is the primary reporting role of a balanced adjusted trial balance?