What is the primary purpose of preparing an adjusted trial balance?

• A. To ensure that all adjusting entries have been made and the ledger is in balance before preparing financial statements.
• B. To close all temporary accounts at the end of the accounting period.
• C. To record all cash transactions for the period.
• D. To detect errors in the posting of transactions to the ledger accounts.

Answer: (A)

Verified step by step guidance

1. Understand the concept of an adjusted trial balance: It is a list of all accounts and their balances after adjusting entries have been made at the end of the accounting period.
2. Recognize the primary purpose: The adjusted trial balance ensures that all adjusting entries are correctly recorded and the ledger is balanced before preparing financial statements.
3. Differentiate the options provided: Analyze each option to determine which aligns with the purpose of the adjusted trial balance. For example, closing temporary accounts is part of the closing process, not the adjusted trial balance.
4. Focus on the correct purpose: The adjusted trial balance is specifically used to verify the accuracy of account balances after adjustments, ensuring readiness for financial statement preparation.
5. Conclude by eliminating incorrect options: The adjusted trial balance does not record cash transactions or detect errors in posting; its role is to confirm adjustments and balance the ledger for financial reporting.