If no adjustments are needed for a particular entity, its
a. post-closing trial balance will be identical to its trial balance.
b. adjusted trial balance will be identical to its post-closing trial balance.
c. trial balance will be identical to its adjusted trial balance.
d. trial balance, adjusted trial balance, and post-closing trial balance will be identical
The correct answer and explanation is :
The correct answer is:
c. The trial balance will be identical to its adjusted trial balance.
Explanation:
In the accounting cycle, businesses go through several steps to ensure accurate financial reporting. These steps include preparing a trial balance, making necessary adjustments, creating an adjusted trial balance, and ultimately preparing a post-closing trial balance after closing entries.
- Trial Balance – This is the initial list of all ledger accounts and their balances before adjustments. It is prepared to check the mathematical accuracy of the bookkeeping entries. However, it does not include adjusting entries for accrued expenses, depreciation, or other period-end adjustments.
- Adjusted Trial Balance – After making necessary end-of-period adjustments (e.g., recording accrued expenses, deferrals, or depreciation), the trial balance is updated to reflect these changes. The adjusted trial balance provides accurate account balances for preparing financial statements.
- Post-Closing Trial Balance – After financial statements are prepared, temporary accounts (revenues, expenses, and dividends) are closed to retained earnings. The post-closing trial balance contains only permanent accounts (assets, liabilities, and equity).
Why is Option C Correct?
If no adjustments are needed for a particular entity, it means that all financial transactions were recorded correctly from the beginning. This means there would be no need for adjusting entries, and the trial balance would already reflect the correct balances. As a result, the trial balance and the adjusted trial balance will be identical because no changes are made in between.
However, the post-closing trial balance will not be identical because temporary accounts (revenues, expenses, dividends) are closed after financial statements are prepared.
Thus, the correct answer is option C: The trial balance will be identical to the adjusted trial balance when no adjustments are required.