What is an unadjusted trial balance?
Like any type of trial balance, an unadjusted trial balance is also a list of all accounts with balances arranged in a columnar format. In this type of trial balance balances will be provided before the adjusting entries are posted
The unadjusted trial balance is prepared after all accounting entries are done in order to check:
- whether debits and credits are equal and
- also to identify possible mistakes before posting adjusting entries.
So, in case of question “what is the major difference between the unadjusted trial balance and the adjusted trial balance“, the answer is:
- unadjusted trial balance will not include adjusting entries and their impact on the balances of general ledger accounts.
Unadjusted Trial Balance Example
Unadjusted trial balance example will include 3 columns, where:
- One will include list of all accounts – names of those
- Second will include debit balances
- And the third will include credit balances
Total sum of debits and credits must be equal, which is in line with double entry accounting, otherwise unadjusted trial balance is incorrect and it is necessary to identify the reasons behind.
With the help of unadjusted trial balance it is possible to:
- Find mistakes in posting of journal entries
- Find errors in general ledger
- Identify other possible mistakes in accounting
However, it is essential to bear in mind that even if debits and credits are equal it does not mean there are absolutely no mistakes in the accounting entries.
Usage of Unadjusted Trial Balance
Unadjusted trial balance is widely used to analyze the data of the entity at the end of accounting period and make decisions about necessary adjusting entries to be posted.
Also this trial balance provides reliable data for the control of business and foresee financial results
Also it is important to take into account, that the statement “the financial statements are prepared from the unadjusted trial balance” is not correct, since unadjusted trial balance is not the last step in the accounting cycle and does not include all the data, like adjusting entries and closing entries.
So more work to be done to prepare the accounting data for the preparation of financial statements.
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