Adjusted Trial Balance: AJE and RJE Columns and Tie-Out to the Financial Statements

The adjusted trial balance is the one schedule in an audit file that connects everything else. The client's unadjusted trial balance goes in on the left. Adjusting and reclassification entries are posted in their own columns. The final column is what the financial statements are built from and what every lead schedule must agree to.

The trial balance guide explains the concepts. This guide shows the layout, the controls that keep it reliable, and a complete worked example whose numbers foot.

What goes in an adjusted trial balance workpaper?

The layout most firms use, sometimes called the working trial balance, has one row per general ledger account and these columns:

Each column is signed: debits positive, credits negative, or two separate debit and credit columns. Pick one convention and keep it throughout.

An AJE changes the amounts the client records. A reclassification entry moves amounts between line items, for example from long-term debt to current maturities. The adjusting journal entries guide covers who proposes them, how they are approved and which ones remain uncorrected.

Step by step: building it

1. Get the unadjusted trial balance as of the balance sheet date. Export it from the client's accounting system. For a QuickBooks client, run the Trial Balance report for the year-end date and export it to a spreadsheet. Save the export in the file unchanged.
2. Prove the opening point. Check that the debits equal the credits, that opening equity and balances agree to the prior-year final column, and that no accounts have been added or merged since last year without an explanation.
3. Map each account to a financial statement line and a lead schedule. See the lead schedule guide and the lead schedule template.
4. Number and post each entry. Every AJE and RJE gets a reference, a description, the supporting workpaper and the approval status. Post the debits and credits to the account rows.
5. Foot and cross-foot. Each column must total zero, and the adjusted column must equal the unadjusted plus the AJE column on every row. See footing and cross-footing.
6. Tie every lead schedule to the final column. A lead schedule balance that differs from the final column means an entry is missing or a schedule is out of date.
7. Build the financial statements from the final column and tie them back. Total assets must equal total liabilities plus equity, and net income must agree to the change in retained earnings.
8. Lock the schedule after sign-off and track any later change. After the documentation completion date, changes require a recorded reason, who made them and who reviewed them. See audit record retention.

Worked example (illustrative numbers)

A small distributor. Amounts in dollars; debits positive, credits in brackets.

The entries behind it:

• AJE-1 Dr operating expenses 24,000, Cr accounts payable 24,000: unrecorded vendor invoices found in the search for unrecorded liabilities.
• AJE-2 Dr revenue 38,400, Cr accounts receivable 38,400: an invoice dated December 30 for goods shipped in January. AJE-3 Dr inventory 26,000, Cr cost of goods sold 26,000: the cost of those goods, which were still in the warehouse at year end.
• AJE-4 Dr operating expenses 15,000, Cr accumulated depreciation 15,000: depreciation on equipment placed in service in the year that the client had not recorded.
• AJE-5 Dr operating expenses 10,000, Cr accrued liabilities 10,000: interest accrued on the note.
• RJE-1 Dr notes payable, long-term 50,000, Cr notes payable, current portion 50,000: principal due within twelve months.

Checks that prove the schedule

• Each column totals zero. Every entry balances on its own, so the AJE column must too: (38,400) + 26,000 + (15,000) + (24,000) + (10,000) + 38,400 + (26,000) + 49,000 = 0, where the 49,000 is the combined debit to operating expenses (24,000 + 15,000 + 10,000).
• Net income. Unadjusted net income is 1,400,000 − 800,000 − 440,000 = 160,000. The entries lower revenue by 38,400, lower cost of goods sold by 26,000 and raise operating expenses by 49,000, a net decrease of 38,400 − 26,000 + 49,000 = 61,400. Adjusted net income is 160,000 − 61,400 = 98,600, which also equals 1,361,600 − 774,000 − 489,000.
• Balance sheet. Total assets are 120,000 + 271,600 + 206,000 + 500,000 − 215,000 = 882,600. Liabilities are 174,000 + 40,000 + 250,000 = 464,000. Equity is 100,000 + 220,000 + 98,600 = 418,600. Liabilities plus equity are 882,600, equal to total assets.
• Reclassification. The RJE moves 50,000 within liabilities, so total liabilities stay 464,000 and net income is unchanged.

A reviewer will test three things first: that the AJE amounts agree to the entries on the summary of adjustments, that each posted entry cross-references a workpaper, and that the final column agrees to the financial statement draft line by line.

Tie-out to the financial statements

The tie-out is two-way. Forward: every financial statement line equals a sum of final-column rows, and the mapping shows which. Backward: each statement amount in the notes and in the cash flow statement agrees to the same source. The statement of cash flows guide shows how the cash flow statement is built from the balance sheet changes in the final column.

Common errors

• Posting an entry on one side only. The column will not total zero.
• Typed-over numbers. Hard-coded values in the adjusted column break the link to the unadjusted data. Use formulas and keep them visible.
• Unadjusted balances that do not agree to the ledger. Re-export from the system at the year-end date rather than retyping.
• Entries recorded in the client's books but not on the schedule, or the reverse. Reconcile the AJE list to the client's journal after the books are updated.
• Passed adjustments mixed in with recorded ones. Keep uncorrected items on the summary of uncorrected misstatements, not in the AJE column.
• Stale prior-year column. Agree it to last year's issued statements, including any reclassifications made then.

The trial balance template and summary of uncorrected misstatements template give a starting layout, and the adjusted trial balance glossary entry summarizes the term.

Frequently asked questions

What is the difference between an adjusted trial balance and a working trial balance?

In practice the terms overlap. A working trial balance carries the unadjusted, adjustment, adjusted and final columns, and its final column is the adjusted trial balance used for the statements.

Are AJE and RJE the same thing?

No. An AJE changes recorded amounts and usually changes net income or equity. An RJE only reclassifies amounts between line items.

Should the client post the audit adjustments in their books?

Normally yes, and the client's management approves them, which supports the auditor's independence. The schedule should show which entries were recorded and which remain uncorrected.

How do I tie the trial balance to the financial statements?

Map each account to a statement line, total the final column by line, and agree each line to the draft statements, then check that total assets equal total liabilities and equity and that net income agrees to the change in retained earnings.

Sources

• AICPA, AU-C Section 450, Evaluation of Misstatements Identified During the Audit, on accumulating and communicating misstatements
• AICPA, AU-C Section 230, Audit Documentation, on changes after the documentation completion date
• AICPA, AU-C Section 320, Materiality in Planning and Performing an Audit
• FASB ASC 210, Balance Sheet, on classification of current maturities

CORAA prepares ready-to-review audit files for US CPA firms from QuickBooks books; you review and sign. See /us.

AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error