Lecture Notes: Preparing an Adjusted Trial Balance
Overview
A lecture on how to prepare an adjusted trial balance using:
- A given trial balance
- A set of adjusting entries for Lincoln Company as of December 31st, 2019.
Key Concepts
Trial Balance
- Initial Trial Balance: Lists out all accounts and balances prior to adjustments.
Adjusting Entries
- Adjustments are made to accounts to reflect accurate balances at the end of an accounting period.
Adjusting Entries Process
- Interest Expense
- Initial balance: $0
- Adjusted balance: $175
- Interest Payable
- Initial balance: $0
- Adjusted balance: $175
- Supplies Expense
- Initial balance: $0
- Adjusted balance: $1800
- Supplies
- Initial balance: $3000
- Credited: $1800
- Adjusted balance: $1200
- Depreciation Expense
- Initial balance: $0
- Adjusted balance: $100
- Accumulated Depreciation (Equipment)
- Initial balance: $0
- Adjusted balance: $100
- Insurance Expense
- Initial balance: $0
- Adjusted balance: $100
- Prepaid Insurance
- Initial balance: $2400
- Credited: $100
- Adjusted balance: $2300
- Unearned Service Revenue
- Initial balance: $50,000
- Debited: $10,000
- Adjusted balance: $40,000
- Service Revenue
- Initial balance: $35,000
- Additional: $10,000
- Adjusted balance: $45,000
Preparing the Adjusted Trial Balance
- Combine the adjusted balances with the initial trial balance.
- Follow the accounting order: Assets, Liabilities, Capital, Drawings, Revenue, and Expenses.
Changes Highlighted
- New accounts added due to adjustments:
- Accumulated Depreciation
- Interest Payable
- Supplies Expense
- Interest Expense
- Depreciation Expense
- Insurance Expense
- Some account balances remain unchanged if not affected by adjustments.
Conclusion
- The adjusted trial balance is a comprehensive list reflecting updated and accurately adjusted accounts.
- Allows for a comparison to the initial trial balance to ensure adjustments are correctly applied and necessary accounts are updated or added.