how do you prepare the ADJUSTED TRIAL BALANCE to present the financial statements.
Adjusted Trial Balance of the company in the non-financial statement in which the list and the balances of the company’s all the accounts are presented after the adjusting journal entries are made at the year-end and those balances are then reported on respective financial statements.
Preparation of adjusted balance sheet
Step 1 – Accrual of revenue that was earned but was not yet recorded.
This arises when an asset is a sale but customer not yet billed for the same. Eg. Account receivable, accrued interest.
Accrued revenue A/C – Dr
To revenue a/c. Cr
Step 2-
Accrual of expenses that were incurred but were not yet recorded.
This is an expense recorded in accounts before the payment is made. Eg Interest payable, salaries and wages payable.
Expense A/C- Dr
Expense payable- Cr
Step 3-
3 – Prepayments
Prepayment is the setting of a payment prior to its due date. Eg. Prepaid rent.
Prepaid expense A/C- Dr
Cash A/C- Cr
Step 4-
4 – Depreciation
Depreciation is a non-cash expense which is identified in order to account for the deterioration of fixed assets to reflect the reduction in useful economic life.adjust this with the prevailing trial balance
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