What is an adjusted trial balance?

An adjusted trial balance is a listing of all general ledger accounts and balances after adjusting entries have been recorded, serving as the basis for preparing financial statements. For professional service firms, the adjusted trial balance ensures all accruals, deferrals, and corrections are reflected before generating reports.

Key characteristics

• Prepared after adjusting entries

• Lists all account balances

• Debits equal credits

• Basis for financial statements

• Shows true period results

• Part of the closing process

Why it matters for professional service firms

The adjusted trial balance reflects the true financial position after all adjustments. Financial statements prepared from unadjusted balances are incorrect. Professional service firms should verify the adjusted trial balance before generating monthly or annual financials.

Real-world example

Rachel's unadjusted trial balance showed revenue of $245,000. Adjusting entries: accrued revenue $18,000 for work performed not billed, deferred revenue adjustment $4,000 for prepaid retainer earned. Adjusted trial balance revenue: $259,000. Financial statements prepared from the adjusted balance reflected accurate period results.