Unadjusted vs Adjusted Trial Balance - Video Tutorials & Practice Problems
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After including the effects of our adjusting entries, we can create our Adjusted Trial Balance.
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Unadjusted vs Adjusted Trial Balance
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Alright. So now let's discuss the idea of the trial balance, specifically the unadjusted trial balance and then how we get to the adjusted trial balance. So a trial balance what this is, it's just gonna list all accounts and their final balances. Okay so you can imagine we were making all these entries and there's gonna be balances in these accounts just like we did before we had a T. Account right? And let's say it was a T. Account for cash, there was some sort of beginning balance in cash. Then we received all sorts of cash for things. We paid cash for all sorts of things and we're crediting it when we're paying cash and it gets us to some ending by balance in cash. This ending balance in cash. That's what we want to show in our trial balance. Okay And we start with our unadjusted trial balance and then we'll make some adjustments to get us to our adjusted trial balance. Okay so the unadjusted trial balance, this is the trial balance. Before we do our adjusting entries then we're gonna do our adjusting entries and that's gonna change some of the balances and that's going to get us to our adjusted trial balance which is the trial balance after the adjusting entries. Okay so I have an example of what a trial balance might look like. I just kind of made up these numbers. It's not it has nothing to do with the lessons we've done so far. But I want to tell you just note a couple of things about the trial balance first is the order that things are are put in here. So notice we've got all our accounts listed down along the left hand side, all sorts of accounts that we've talked about. Um and you should be semi familiar with, but the way we list them first, we list all of our balance sheet, our balance sheet accounts. So notice that's everything all the way down here, up to dividends, right? All of these accounts, cash accounts, receivable, supplies, accounts, payable under revenue. All these are balance sheet accounts, right? And notice that we start with the assets. Um You can't really see that I'll do it on this side. These are assets and then and that ends right there and then right here in blue, these are our liabilities and then we've got some equity accounts here. Right? And remember that all of those revenue and expense accounts, those will be closed to retained earnings uh once we're done with the process. So we'll we'll learn more about that as well. Um But that's the idea is that we start with our assets liabilities, equity and then we show our income statement accounts below it. So down here is income statement. So notice with this, with this information we're pretty set up to make our financial statements and that's what I've got here at the bottom. The adjusted trial balance shows the final numbers for the period and we're gonna use this to create the financial statements. Okay, so let's go back up and let's look at this just a little bit more and notice how we've got this set up. So we've got on the left hand side, we've got our accounts and then we've got our unadjusted trial balance first, right? We've got these debits and credits based on what the balance is in those accounts, right? And we have an unadjusted trial balance that totals out right? We've got our debits equal our credits down here for our unadjusted trial balance. And then we're gonna make a few entries. Right? Our adjusting entries, the things that we were just discussing. So I've highlighted some of them here notice here, this 1000 this 1000 that's prepaid rent being credited. So we're decreasing our prepaid rent by 1000 And increasing our rent expense by 1000. If you would notice on our unadjusted trial balance, there's no balance for rent expense, right? There was no balance for rent expense because it was just sitting in pre paid rent. And then finally, we're making these adjustments to these accounts before we prepare the financial statements. So there you can see in the adjusted trial balance, we have that balance there in the adjusted trial balance for rent expense. Okay, same thing with let's do this other 1, 900 right salary expense and salary payable. This has to do with those accrued expenses. So you can imagine this could have been some amount that the employee paid. Uh the employee worked for us, but we haven't paid them yet. Right? So we accrued that liability, the salary payable uh to account for that. So noticed there was some balance, there was a balance here In our unadjusted trial balance, which was money that we probably paid to. The employee took the expense, but then there was some time that we haven't paid them yet. So we're making that adjustment and it gets us to our final balance of 1800, right? There was a $900 balance. We made a $900 adjustment gets us to a final balance of 1800. That's the number that would end up on the financial statements. One more here. Just want to point just a few of these out. We've got depreciation expense and accumulated depreciation. Right? So pretty straightforward, we made that entry and now we have an accumulated depreciation balance, right? It went from nothing up to 400. We have a depreciation expense down. So there we go. Our adjusted trial balance here on the right hand side it just takes the unadjusted trial balance and then it adds the effects of the adjustments to get to our final balances. Okay, so that adjusted trial balance. Those are the numbers that are gonna end up on our financial statements like I have right there behind me. Cool. Alright, so that's our trial balance. Let's go ahead and move on to the next video
