Which trial balance a client's statements are built from
Which version of a client's trial balance the statements should be built from, and how adjusting and closing entries change it from one to the next.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
"Please send your trial balance at year end" sounds like a precise request. It is not. Depending on when the client runs the report, the firm may receive figures before the year's adjustments, after them, or after the books have been closed for the year. Each version gives different statements, and only one of them is right to build from.
Mix-ups here cause some of the most confusing review notes: retained earnings that do not tie to last year, a profit figure that vanished, or depreciation counted twice because the client had already posted it. Knowing which version you have, and what it has already been through, saves hours.
Three trial balances
Investopedia's explanation of the trial balance describes three types:
- The unadjusted trial balance, prepared before adjusting entries.
- The adjusted trial balance, used to prepare the financial statements.
- The post-closing trial balance, prepared after closing entries.
Investopedia also notes that a trial balance is an internal document with no special preparation conventions, and may be prepared as often as a company needs it. That is why the client's "trial balance" can mean any of these, run on any date, with whatever layout their package produces.
Build from the adjusted trial balance
The statements come from the adjusted trial balance: every balance after the year-end adjustments, but before the income and expense accounts are closed out.
In practice, the firm usually receives an unadjusted trial balance and makes the adjustments itself: depreciation, accruals, prepayments, provisions, inventory, tax. The adjusted trial balance is the result of the firm's work, not something the client sends.
A balanced trial balance is a starting point, not a clean bill of health. Investopedia warns that amounts posted to the wrong accounts, unrecorded transactions and offsetting errors all leave a trial balance in balance. The adjustments stage is where many of those are found.
Before relying on what the client sent, ask:
- What date was it run for, and when was it run? A trial balance run before the last bank statements were processed is incomplete.
- Has anything been adjusted already? If the client's bookkeeper posted depreciation, the firm must not post it again.
- Has the year been closed? If the income and expense accounts are empty, you have a post-closing trial balance, and the year's profit is inside retained earnings.
Uploading and adjusting in Achekam
Staff can upload a client's trial balance to Achekam as an Excel workbook, a CSV file or a PDF that has a text layer, and Achekam reads it into a trial balance. Files of up to 200 MB are accepted, and a stray quote mark in a CSV file is read as an ordinary character and noted, so later rows are not lost.
The year-end adjustments are then posted in the Studio. Achekam lets staff post a year-end adjusting entry, and a wrong one is reversed with a record of who reversed it and why, never deleted. Depreciation is a good example of the division of labour: Achekam does not calculate depreciation, but it presents the charge from the trial balance and flags when it does not agree with the movement in accumulated depreciation, which is often the first sign that the client has, or has not, already posted it.
The uploaded figures plus the adjusting entries form the adjusted trial balance the statements are built from.
The post-closing balance becomes next year's opening
Investopedia explains that the post-closing trial balance shows balances after the closing entries and is the starting trial balance for the next year. After closing, the income and expense accounts are at nil and the year's result has moved into retained earnings.
Two practical consequences:
- Opening balances next year. The client's opening retained earnings next year should equal the closing retained earnings in this year's statements. If the client's books were not updated with the firm's adjustments, they will not, and next year starts with a reconciling difference.
- Post the adjustments back. Agree with the client who posts the firm's year-end adjustments into its own books, and check the next year's opening trial balance against the signed statements.
Client books with no year-end close
When the client keeps its books on Achekam, there is a limit to know about. There is no year-end closing entry in the client's own books: profit is not closed to retained earnings and shows as its own line on the balance sheet.
For the firm, that means the client's balance sheet will show retained earnings at the old figure, plus a separate profit line that keeps accumulating. When preparing statements, treat that profit line as part of retained earnings and make sure the statement of changes in equity shows the year's profit and the opening balance correctly. When the figures move into next year's statements, check that the prior year's profit has been included in opening retained earnings rather than being counted again.
A checklist for the trial balance request
When asking a client for year-end figures, be specific:
- the trial balance at the financial year-end date, run after all transactions for the year are captured;
- a statement of whether any year-end adjustments have already been posted, and which;
- confirmation that the year has not been closed, or, if it has, the closing entries;
- last year's signed statements, to agree opening balances.
Uploading a trial balance covers formats and the checks made on import, and client books where profit is not closed deals with that limit in more depth. Change the wording of the firm's year-end request letter this season; one clear sentence about which trial balance you want avoids a round of questions.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
