An adjusted trial balance is a listing of every account in the general ledger along with its balance, prepared after adjusting entries have been posted at the close of an accounting period. It sits at a specific point within the accounting cycle, coming after the unadjusted trial balance and adjusting entries, but before the financial statements themselves are actually prepared.
Why it exists as a separate step
Before adjusting entries are made, an unadjusted trial balance reflects only the routine transactions recorded during the period, missing any accrued revenue, accrued expenses, or amounts that need to be shifted between balance sheet and income statement accounts to comply with accrual accounting. The adjusted trial balance confirms that, after all of those period-end adjustments have been posted, total debit balances still equal total credit balances, giving accountants a clean, verified foundation to work from before drafting the actual financial statements.
How it is used to prepare financial statements
Once an adjusted trial balance is confirmed to balance, its account balances are sorted directly into the income statement (revenue and expense accounts) and the balance sheet (asset, liability and equity accounts), with net income from the income statement flowing into retained earnings on the balance sheet. Many accounting worksheets physically lay the adjusted trial balance out in columns right next to where the income statement and balance sheet figures will go, making the mapping from one to the other explicit and easy to check.
Catching errors before statements are drafted
If an adjusted trial balance does not balance, that is a clear signal an error exists somewhere in the adjusting entries or in how they were posted, and it is far easier and cheaper to find and correct that error at this stage than after financial statements have already been drafted around incorrect figures. This is one of the main reasons the adjusted trial balance survives as a discrete checkpoint even in fully automated accounting software, which can produce one on demand at any time rather than only at a formal period-end close.
Adjusted versus post-closing trial balance
The adjusted trial balance is not the final checkpoint in the cycle: after financial statements are prepared, closing entries transfer the balances of temporary accounts into retained earnings, and a post-closing trial balance is then prepared to confirm the books are back in balance with only permanent accounts remaining open for the start of the next period.
Why some companies use a worksheet
Many bookkeepers and smaller companies use a multi-column accounting worksheet that lays the unadjusted trial balance, the adjustments, the adjusted trial balance, and the resulting income statement and balance sheet columns all side by side on a single page. This makes it easy to trace any single account from its original unadjusted figure, through whatever adjustment was applied, to exactly where it ends up on the final financial statements, which is especially useful for training new staff or for an external reviewer checking the accuracy of a close. Modern accounting software typically produces the same underlying information on demand without a physical worksheet, but the logical sequence the worksheet makes visible is exactly what the software is still doing behind the scenes.