The balances in each account are then carried forward into the next reporting period.
Sunny Sunglasses Shop produced the below trial balance for the month of January.Accounting Trial Balance
Since each of the income statement accounts were closed, only balance sheet accounts now appear in the above accounting trial balance.
These accounts are carried forward into February, the next reporting period.
The retained earnings account now shows the balance from net income for January that was transferred to retained earnings as a result of the closing entries in the last section. Since this was the first month of operations, the retained earnings balance equals the net income for January.
The retained earnings account continues to accumulate net income (or losses) during the life of the business, less any amount distributed to the owners.
The final step in the accounting cycle is the reversing accounting entry that occurs at the beginning of the next reporting period.The final trial balance serves two main purposes: It verifies the equality of the debits and credits after the closing entry process in the accounting cycle.It provides a listing of each account balance that is carried forward into the next reporting period.
From the Accounting Trial Balance to Step 10 in the Accounting Cycle: the Reversing Accounting Entry