Multiple Choice
A trial balance prepared after all closing entries have been posted is called a(n):
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3. Accrual Accounting Concepts
Post-Closing Trial Balance
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following statements is true regarding the post-closing trial balance?
A
It includes all revenue and expense accounts.
B
It contains only permanent (real) accounts with nonzero balances.
C
It is prepared before closing entries are made.
D
It shows the net income or loss for the period.
Verified step by step guidance1
Understand the purpose of a post-closing trial balance: It is prepared after closing entries are made to ensure that the ledger is balanced and only permanent accounts remain.
Recognize the difference between permanent (real) accounts and temporary (nominal) accounts: Permanent accounts include assets, liabilities, and equity, while temporary accounts include revenues, expenses, and dividends, which are closed to retained earnings at the end of the period.
Identify the accounts included in the post-closing trial balance: Only permanent accounts with nonzero balances are listed, as temporary accounts are closed and their balances are reduced to zero.
Clarify the timing of preparation: The post-closing trial balance is prepared after closing entries are made, not before.
Understand that the post-closing trial balance does not show net income or loss: Net income or loss is reflected in the retained earnings account after closing entries, not directly in the post-closing trial balance.
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