An Adjusted Trial Balance is a key accounting tool that lists all general ledger accounts and their balances after accounting adjustments have been made, such as prepayments and accruals, serving as a foundational element for preparing the final financial statements.
Adjusting entries are made at the balance-sheet date under an accrual accounting system to ensure that the income and expenditure of a business are included in the correct period. Examples include adjustments for depreciation, prepayments, accruals, and closing stock.
An Adjusting Journal Entry (AJE) is an entry made in an accounting journal to allocate income or expenses to the period in which they actually occurred, typically as a part of the end-of-period adjustments to the financial statements.
An extended trial balance provides a detailed verification of the balances extracted from the ledger by adding columns for adjustments, accruals, and prepayments, ultimately clarifying entries for the profit and loss account and balance sheet.
