The adjusted trial balance
After adjusting entries are posted, the balances are listed again in an adjusted trial balance. Its totals must agree, and the financial statements are prepared from it.
Unadjusted trial balance: Sunrise Tours, 31 March 2026 (Rs.)
| Account | Debit | Credit |
|---|---|---|
| Cash at bank | 420,000 | |
| Trade receivables | 260,000 | |
| Prepaid insurance | 36,000 | |
| Vehicles (cost) | 3,000,000 | |
| Accumulated depreciation: vehicles | 600,000 | |
| Trade payables | 95,000 | |
| Unearned tour revenue | 120,000 | |
| Capital | 2,000,000 | |
| Drawings | 240,000 | |
| Tour revenue | 2,571,000 | |
| Rent expense | 220,000 | |
| Salaries expense | 900,000 | |
| Fuel expense | 310,000 | |
| Totals | 5,386,000 | 5,386,000 |
Adjustments at 31 March 2026
- (a) Insurance used up during the year: Rs. 24,000.
- (b) Depreciation on vehicles: 10% of cost.
- (c) Unearned tour revenue now earned: Rs. 80,000.
- (d) Salaries owing: Rs. 75,000.
- (e) Tours completed but not yet billed: Rs. 50,000.
Worked example: journalise the adjustments
Write the adjusting entries for (a) to (e).
- (a) Dr Insurance expense 24,000; Cr Prepaid insurance 24,000.
- (b) Depreciation: 10% × 3,000,000 = 300,000. Dr Depreciation expense 300,000; Cr Accumulated depreciation 300,000.
- (c) Dr Unearned tour revenue 80,000; Cr Tour revenue 80,000.
- (d) Dr Salaries expense 75,000; Cr Salaries payable 75,000.
- (e) Dr Trade receivables 50,000; Cr Tour revenue 50,000.
Five entries. Each touches one income statement account and one SFP account, and none touches cash.
Adjusted trial balance: Sunrise Tours, 31 March 2026 (Rs.)
| Account | Debit | Credit |
|---|---|---|
| Cash at bank | 420,000 | |
| Trade receivables (260,000 + 50,000) | 310,000 | |
| Prepaid insurance (36,000 − 24,000) | 12,000 | |
| Vehicles (cost) | 3,000,000 | |
| Accumulated depreciation (600,000 + 300,000) | 900,000 | |
| Trade payables | 95,000 | |
| Salaries payable | 75,000 | |
| Unearned tour revenue (120,000 − 80,000) | 40,000 | |
| Capital | 2,000,000 | |
| Drawings | 240,000 | |
| Tour revenue (2,571,000 + 80,000 + 50,000) | 2,701,000 | |
| Rent expense | 220,000 | |
| Salaries expense (900,000 + 75,000) | 975,000 | |
| Fuel expense | 310,000 | |
| Insurance expense | 24,000 | |
| Depreciation expense | 300,000 | |
| Totals | 5,811,000 | 5,811,000 |
Worked example: check the totals and find the profit
Prove that the adjusted trial balance agrees, find the profit for the year, and show how much the adjustments changed it.
- Debits: 420,000 + 310,000 + 12,000 + 3,000,000 + 240,000 + 220,000 + 975,000 + 310,000 + 24,000 + 300,000 = 5,811,000.
- Credits: 900,000 + 95,000 + 75,000 + 40,000 + 2,000,000 + 2,701,000 = 5,811,000.
- Cross-check: each side rises by 425,000 (Dr: 50,000 − 24,000 + 75,000 + 24,000 + 300,000; Cr: 300,000 + 75,000 − 80,000 + 130,000), and 5,386,000 + 425,000 = 5,811,000.
- Expenses: 220,000 + 975,000 + 310,000 + 24,000 + 300,000 = 1,829,000.
- Profit: 2,701,000 − 1,829,000 = 872,000.
- Before adjustments: 2,571,000 − (220,000 + 900,000 + 310,000) = 2,571,000 − 1,430,000 = 1,141,000, which was 1,141,000 − 872,000 = 269,000 too high.
Both totals are Rs. 5,811,000. Profit for the year = Rs. 872,000; without the adjustments it would have been overstated by Rs. 269,000.
The worksheet
Many accountants use a worksheet with column pairs for the unadjusted trial balance, the adjustments, the adjusted trial balance, the income statement and the statement of financial position. It is a working paper, not a formal statement, but it catches errors before the statements are drafted.
A Sri Lankan tour operator collects deposits months before the tourist season. Without adjustments its profit would mix this year's and next year's tours; the adjusted trial balance puts each rupee in the right year.
Short answer: “What is an adjusted trial balance?” A list of all account balances after the adjusting entries are posted; its equal totals are the base for the financial statements.
Essay: “From the given trial balance and adjustments, prepare the adjusting entries and an adjusted trial balance, and find the profit.” Journalise each adjustment, update every affected balance, list the adjusted trial balance with equal totals, then compute profit from the income and expense lines.
Adjusted balance = unadjusted balance ± adjustment, account by account. Both totals rise by the same amount.