At the end of each reporting period, accountants and bookkeepers verify the records of a business' transactions -- its debits and credits -- for that period. Once this is complete, this ledger is called the post-close trial balance.
To understand which accounts will not appear on a post-close trial balance, we need to start with what does appear on the post-close trial balance.
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How does the trial balance work?At a high level, the trial balance is the record of every transaction that a business has completed in a given period. To prepare the books to be reported for that period, an accountant must "close" the book for that period, cutting it off from future transactions. Once closed, any subsequent transactions -- like revenue, costs, investments, and so on, will be reported in the following period.
With the numbers now set and no new transactions being recorded, the accountant can get to work verifying the trial balance is accurate. Every debit should be offset by a corresponding credit for the books to balance. In other words, the sum of every debit should equal the sum of every credit for the entire period.
Once balanced, the accountant can transfer the trial balance to the general ledger and create the company's financial statements.
If that is how the trial balance works, what accounts should be excluded?Implied in this process is that the debits and credits used in balancing the trial balance have actual values. If a transaction debited zero dollars and the credited zero dollars, that transaction effectively didn't happen.
In other words, the only accounts that appear on the post-close trial balance are the accounts that have a non-zero balance. With no debits or credits impacting these zero-balance accounts, they're irrelevant to the business' books for that period, and thus excluded.
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The article Which of the Accounts Will Not Appear on a Post-Closing Trial Balance originally appeared on Fool.com.
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