Notes

Explore what post-closing trial balance is, see its purpose and the difference from adjusted and unadjusted trial balance, and see examples of post-closing entries.
What Is the Post-Closing Trial Balance?
The accounting cycle is like a circle. It has a definite beginning and a definite end. The last thing that occurs at the end of the accounting cycle is to prepare a post-closing trial balance. What is a post-closing trial balance, you wonder? The post-closing trial balance is the report that lists all the accounts of a company and their balances after all adjustments and closing entries have been made.

Why Is It Important?
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In the accounting cycle, there are two other trial balances that are prepared. The first is simply called the trial balance. This report lists all the accounts that a company has and their balances. The next one is called the adjusted trial balance and is a list of all the company accounts and their balances after any adjustments have been made. So if there are already two other trial balance reports, why would you possibly need another one? The answer to this question is relatively simple. The post-closing trial balance shows the final balance in company accounts for the current accounting period, which are the exact same balances that the accounts have in the beginning of the next accounting period.

Example Post-Closing Trial Balance
Let's look at an example of a post-closing trial balance.

Wasabi International is a small company that sells animal grooming products worldwide. In the first quarter of operations, the post-closing trial balance looked like this:

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Do you notice that not all accounts show up on the post-closing trial balance? Why is that? The answer is because only the permanent accounts of a company show up on the report.

Permanent accounts are accounts that once opened will always be a part of a company's chart of accounts. Revenue, expenses and dividends do not show up on the post-closing trial balance because they are considered temporary accounts. Temporary accounts are accounts whose balances are zeroed out at the end of each accounting period. When a new accounting period opens, these accounts are used again and will accrue balances until the accounting period comes to an end. At that time, the accounts will be closed to permanent accounts and once again have a zero balance.

Lesson Summary
The golden rule of accounting is to maintain balance. In order to do so, all debits must equal all credits. The purpose of the post-closing trial balance is just that. It ensures that at the end of an accounting period, the sum of the total debits is equal to the sum of the total credits. The post-closing trial balance gives a listing of each permanent account that a company has and its balance.

Permanent accounts are accounts that once opened will always be a part of a company's chart of accounts. The post-closing trial balance will never contain temporary accounts. Temporary accounts are accounts that are not always a part of a company's chart of accounts. The balances in temporary accounts are zeroed out at the end of each accounting period by transferring them to a permanent account. The reason for this is so that they can be used again in the next accounting period. Once the post-closing trial balance is run, and the verification is made that the sum of all the debits is equal to the sum of all the credits, then and only then is the accounting cycle complete.