.
REMARK; there is NO CASH adjustment
4.ACCRUAL ACCOUNTING & FINANCIAL STATEMENTS
ADJUSTED TRIAL BALANCE
Adjusted trial balance:prepared after all adjusting entries have been recorded and posted
to the accounts
The financial statements can easily be prepared from the adjusted trial balance
*If the trial balance is NOT adjusted – we cannot prepare financial statements. PREPARING
THE FINANCIAL STATEMENTS
1. The INCOME STATEMENT Revenue and Expense accounts
2. The STATEMENT OF RETAINED EARNINGS Retained Earnings (beginning balance),
Net income/loss from the income statement and Dividends from the trial balance
3. The resulting balance of retained earnings is used to prepare the BALANCE SHEET
along with the asset, liability, and any other stockholders’ equity accounts from the trial
balance
*when the company is just started, Retained Earning may not appear on financial
statements because the value is 0.
*Some accounts in the adjusted trial balance have the SAME balances as the trial balance =
no adjusting entries affected them. The adjusted trial balance also includes accounts that
do not appear in the trial balance (ex. depreciation?)
STEPS IN ACCOUNTING CYCLE
