Income Summary Post Closing Trial Balance

A post closing trial balance is a listing of all balance sheet accounts containing non zero balances at the end of a reporting period the post closing trial balance is used to verify that the total of all debit balances equals the total of all credit balances which should net to zero.

Income summary post closing trial balance. Debit the income summary for that amount and credit the retained earnings account on the balance sheet. The post closing trial balance is used to check the debits and. An adjusted trial balance contains nominal and real accounts. We call this trial balance the post closing trial balance.

Nominal accounts are those that are found in the income statement and withdrawals. The trial balance after the closing entries are completed is now ready for the new year to begin. Income summary account is a temporary account used in the closing stage of the accounting cycle to compile all income and expense balances and determine net income or net loss for the period. Its purpose is to test the equality between debits and credits.

After this entry is made all temporary accounts including the income summary account should have a zero balance. Now that paul s books are completely closed for the year he can prepare the post closing trial balance and reopen his books with reversing entries in the next steps of the accounting cycle. Notice that the post closing trial balance lists only permanent or balance sheet accounts. After the revenue and expense accounts have been closed it is desirable to prepare post closing trial balance.

Since only balance sheet accounts are listed on this trial balance they are presented in balance sheet order starting with assets liabilities and ending with equity. Close the income summary account. This trial balance has same total as appears in balance sheet. The balance in retained earnings agrees to the statement of retained earnings and all of the temporary accounts have zero balances.

An adjusted trial balance contains nominal and real accounts. In the closing stage balances in all income accounts are transferred to the income summary account by debiting. The unadjusted trial balance is prepared after entries for transactions have been journalized and posted to the ledger. Post closing trial balance this is prepared after closing entries are made.

Prepare post closing trial balance for example 1 after closing. An post closing trial balance is formatted the same as the other trial balances in the accounting cycle displaying in three columns. Nominal accounts are those which have entries from the income statement and real accounts are those which have entries from the balance sheet. Real accounts are those found in the balance sheet.

The temporary accounts have therefore not been listed in post closing trial balance. This leaves you with 75 000 net profits in the income summary account. The net balance of the income summary account is closed to the retained earnings account.