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Why doesn't the balance sheet equal the post-closing trial balance?

Author:
Harold Averkamp, CPA, MBA

Definition of Balance Sheet

The total amounts on a balance sheet show that a company’s assets = liabilities + owner’s (stockholders’) equity.

Definition of Post-Closing Trial Balance

The total amounts on a post-closing trial balance show that the accounts having debit balances = the accounts having credit balances.

Example of Balance Sheet Totals

Assets normally have debit balances. However, there are a few asset accounts that are expected to have credit balances. (These are known as contra asset accounts.) One example is Accumulated Depreciation.

Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets reported on the balance sheet will report the net amount of $70,000.

Example of Post-closing Trial Balance Totals

Using the amounts above, the company’s post-closing trial balance will report $200,000 in the debit column and $130,000 in the credit column. This will cause a difference of $130,000 between the balance sheet totals and the post-closing trial balance totals.

Other examples of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include:

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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