A post-closing trial balance is the final accounting report from the accounting cycle. The accounting cycle represents how companies identify and analyze transactions prior to posting information into the company’s general ledger. Companies often employ several accountants to manage their financial information and accounting reports. The trial balance is an accounting report that contains all information from the company’s general ledger. Companies usually make several different entries during the accounting close-out process, which will result in the creation of the post-closing trial balance.
The trial balance is a brief summary of a company’s general ledger. Rather than including every financial transaction or other information from financial accounts, the trial balance only includes the account number, account name, and final total for each financial account. Accountants use the trial balance to ensure all debits equal all credits in the company’s general ledger. Close-out journal entries may also be prepared from the information contained on the company’s trial balance.
Companies go through the accounting close-out process to ensure the financial information for a specific accounting period is accurate and valid. Financial accounting usually requires companies to record financial transactions in a timely manner. Most companies use calendar months as their accounting periods. Accountants prepare journal entries, reconciliations and financial reports to review and balance financial information. Adjusting journal entries correct any issues in the general ledger prior to running financial statements.
Where financial statements are information used by external business stakeholders, the post-closing trial balance sheet is a common internal report used by accounting personnel. Historically, this report was a paper copy filed with the company’s financial paperwork. While paper copies may still be in use today, many businesses use computerized accounting software for managing their accounting functions. Accountants use an electronic copy of the post-closing trial balance and export this information into a spreadsheet. Spreadsheets allow accountants to manipulate this information for trend analysis.
A trend analysis will report information relating to increases or decreases in individual financial accounts on a monthly basis. Accountants identify trends by looking for manager statistical variances when comparing the current post-closing trial balance report to previous periods. Business owners and managers request this information to ensure company expenses do not increase exponentially and cut into the company’s profit. Business owners and managers can also use post-closing trial balance to create financial ratios. Financial ratios are mathematical formulas that provide business owners and managers with indicators to measure against a competing company or the industry standard. Financial ratios are a performance management technique using accounting information.