What Is the Purpose of the Post-Closing Trial Balance?

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    Definition

    • A trial balance is a financial data summary that lists two columns, one with credits and another for debits. Ideally, total amounts in both columns are equal. A post-closing trial balance is a report financial managers prepare after entering all entries, including adjusting entries and period-end corrections. Accountants use the term "closing corporate books" to describe the series of activities that lead to the preparation of a trial balance. Accounting supervisors delve into a post-closing trial balance to make sure no essential information is missing in the underlying data.

    Purpose

    • If correctly prepared, a post-closing trial balance gives financial managers the assurance that financial statements are more likely to be accurate. This is because data coming from a post-closing trial balance feed directly into accounting reports without going through other record-keeping and reporting processes. In modern economies, publicly listed companies often publish financial statements at the most commercially opportune moment -- sometimes ahead of rivals -- so investors can see firsthand top leadership's prowess in running efficient activities. Therefore, the preparation of a post-closing trial balance is a key part of financial statement preparation, and a lot of strategic thinking goes into the best way and time to issue accounting reports.

    Regulatory Compliance

    • By preparing an accurate post-closing trial balance, a company takes tangible steps to publish performance data synopses that abide by U.S. Securities and Exchange Commission guidelines, along with edicts coming from the Public Company Accounting Oversight Board. The PCAOB and SEC, as well as other regulatory agencies, work together to foster financial transparency, strengthen the integrity of equity markets and prevent operating ills -- such as fraud -- that corrode the financial reporting process.

    Financial Statement Certification

    • In preparing a post-closing trial balance, financial managers don't only think about accurate performance data reporting, but also lay the groundwork for effective and efficient audit work. External auditors then can quickly review company records, test account details and balances, identify operating risks and certify financial statements. If auditors find no major issue during the review, they issue an unqualified report, otherwise they publish an adverse report. A complete set of accounting reports includes a balance sheet, an income statement, an equity report and a statement of cash flows.

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