Final answer:
After adjusting entries are made, an adjusted trial balance is prepared to verify the equality of total debit and credit balances before financial statements are created.
Step-by-step explanation:
After the adjusting entries are posted, an adjusted trial balance is prepared. The main purpose of the adjusted trial balance is to verify that the total debit balances equal the total credit balances, which confirms that the books are in balance and that the accounts reflect all adjustments. This step is crucial before the preparation of financial statements such as the income statement, statement of retained earnings, and balance sheet.
To prepare the adjusted trial balance, a list of all accounts is created along with their final balances after adjustments. These include all assets, liabilities, equity, revenues, and expenses. An examination is then conducted to ensure that the sum of all debit account balances equals the sum of all credit account balances. After the adjusting entries are posted, an adjusted trial balance is prepared. The adjusted trial balance verifies the equality of the total debit and credit balances before the financial statements are prepared.