Let's work through an example where we prepare an adjusted trial balance. So we're told using the trial balance and the following adjustments, the following adjusting entries for Lincoln Company, we need to prepare an adjusted trial balance on December 31st, 2019. So we have the trial balance over on the left side and then our five adjustments, our five adjusting entries over on the right. So we can use that information. to figure out what we would need to show on an adjusted trial balance so we need to figure out okay what are these adjusted balances going to be so let's go piece by piece in our adjusting entries so first of all interest expense we didn't have any interest expense before so we will show interest expense with a balance of 175 interest payable we didn't have any interest payable either So its balance on the adjusted trial balance will just be 175. Supplies expense.
Well when we take a look at our trial balance we don't see any supplies expense on there. So the supplies expense balance will just be 1800. Supplies. Well supplies we had three thousand dollars worth and then we credited supplies for 1800 in our adjusting entry. So its balance is now 1200. Now depreciation expense.
We didn't have any depreciation expense in our trial balance. So its balance will be 100. And same with our accumulated depreciation on that equipment. Now insurance expense.
We didn't have any insurance expense in our trial balance. So we'll just show the 100. for insurance expense on our adjusted trial balance and then prepaid insurance well prepaid insurance we had $2400 and we credited that account for 100 in our fourth adjusting entry so it now only has $2300 in that account now unearned service revenue well unearned service revenue We had $50,000 worth. Then we debited that liability for 10,000 so we only have 40,000 now and service revenue. We had 35,000 up in our trial balance and we added on an additional 10,000 so we have 45,000 now in our service revenue. So these are all the updated.
balances based off of our adjusting entries. So now we can take this information and mix it in with the information in our original trial balance to create an adjusted trial balance. So when we do that this is what your adjusted trial balance should look like. Remember just like when you're preparing a trial balance you list out your assets then your liabilities you then your capital, then your drawings, your revenue, and your expenses. And your balances will be on the side of their normal balance.
So we have this adjusted trial balance for Lincoln Company. And you'll notice these accounts and balances that are highlighted in red, these are the ones that changed. So there's some account balances that will be exactly the same as our original trial balance.
That's because those accounts were not affected by the adjusting entries. So here's our adjusted trial balance, and now we can compare it to just the trial balance itself. So we not only updated balances, but we also had to add in new accounts. Our original trial balance didn't have accumulated depreciation, interest payable, supplies expense, interest expense, depreciation expense, or insurance expense. Those accounts we had to add in when we prepared our adjusted trial balance.