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Financial Accounting

Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems.

3. Accrual Accounting Concepts

Post-Closing Trial Balance

After closing out our temporary accounts, we make one more trial balance that shows our permanent accounts.

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Post-Closing Trial Balance

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Alright, so now let's look at the post closing trial balance. This is the freshest one with nothing in our income statement accounts. So the post closing trial balance, It's only showing our permanent accounts. Okay, And this is basically a balance sheet at this point because everything else is gone and our permanent accounts are generally just on the balance sheet. So let's go ahead and look at what happened. We had this adjusted trial balance, which I literally just copy paste this from the adjusted trial balance uh when we learned adjusted trial balance and then we did these closing entries. These are the entries that we just made over here, right? We had those entries related to um to revenue, those entries related to expenses and we had the entry for the dividends. Cool. So notice what's left after those entries notice that all of our revenue accounts, all our dividends accounts, expense accounts, all of those are empty, there's no balance in any of those accounts. And what's left, we've got our assets appear, we've got our liabilities and we've got our equity right? So there you go, we are left with just our balance sheet accounts. And those are the only ones that have a balance in the post closing trial balance, right? So this is where we start the year and then we're gonna start earning revenue again, start having expenses paying dividends, right? And those other balances are gonna start accumulating again and then we'll close those balances again and the cycle continues. Cool. Alright, so that is our post closing trial balance and I just want to make this note which I think we've talked about before but I just wanted to drive it in right here. Is that retained earnings is hit by two closing entries right? We saw that there was the dividends entry and then the entries related to net income, right? And we split that up into the revenue, the expenses and then the closing of income summary. Right? So there's those two crucial entries for retained earnings and that takes us back to that general account flow. So if we think about retained earnings we would have that beginning balance in retained earnings BB. Re is what I'm calling it. Beginning balance, retained earnings plus net income minus dividends equals the ending balance in retained earnings. Cool. Alright so that's your post closing trial balance. Let's go ahead and move on to the next video.
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