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Trial balance and adjusted trial balance
#cfa-level-1 #reading-23-financial-reporting-mechanics
A trial balance is a document that lists account balances at a particular point in time. Trial balances are typically prepared at the end of an accounting period as a first step in producing financial statements. A key difference between a trial balance and a ledger is that the trial balance shows only total ending balances. An initial trial balance assists in the identification of any adjusting entries that may be required. Once these adjusting entries are made, an adjusted trial balance can be prepared.
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cumented authorization to record the entry. As the initial step in converting business transactions into financial information, the journal entry is useful for obtaining detailed information regarding a particular transaction. <span>Adjusting journal entries, a subset of journal entries, are typically made at the end of an accounting period to record items such as accruals that are not yet reflected in the accounting system. <span><body><html>

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ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue. <span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue. <span><body><html>


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