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What is Adjusted Trial Balance?

The Adjusted Trial Balance is a statement prepared at the end of the accounting cycle after adjusting entries have been made. It lists all the accounts with adjusted balances, ensuring that the total debits equal total credits. Adjusting entries are made to record accruals, deferrals, estimates, and corrections, and it serves as a foundation for preparing the financial statements.

Why is it important or used in Accounting?

The Adjusted Trial Balance is crucial in accounting for several reasons:

Advantages of Adjusted Trial Balance:

Disadvantages of Adjusted Trial Balance:

Example of Adjusted Trial Balance for a Wholesaler or Retailer Business:

Consider a retailer that follows the accrual basis of accounting and has a fiscal year ending on December 31. At the end of the year, the retailer needs to adjust entries for accrued salaries and unearned revenue.

  1. Accrued Salaries Adjustment:
  1. Unearned Revenue Adjustment:

After these adjusting entries are made in the general ledger, the adjusted trial balance is prepared. It would include these adjusted amounts for Salary Expenses, Accrued Liabilities, Unearned Revenue, and Revenue. It ensures that these adjustments are reflected accurately before preparing financial statements. The totals of debits and credits while adjusting trial balance must match, verifying the accuracy of the adjustments made.

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