Question

1. Explain how an unadjusted trial balance differs from an adjusted trial balance.
2. Explain the difference between a classified Balance Sheet and an unclassified Balance Sheet.
3. Explain the purpose of an Income Summary account and what does its balance reflect after revenue accounts and expenses accounts have been closed out.

Answer 1

The explanation are as follows,

1. The trial balance before a passing any closing entries as well as year-end entries is called as unadjusted trial balance. Where as once those are done, it is called as adjusted trial balance. Financial Statements are prepared on the basis of adjusted trial balance.
2. Classified balance sheet is what summarizes assets and liabilities in a classified manner that is, it provides break up wise details of all assets and liabilities, short term and long term and all the details in a classified manner. Whereas unclassified balance sheet provide details in a summarised manner.
3. Income summary account is what closes all nominal accounts and carries the balance to the balance sheet. Nominal accounts means all the temporary accounts.