Introduction to Preparing Financial Statements

What you’ll learn to do: Use an adjusted trial balance to prepare financial statements

Step 7. Prepare Financial Statements.Let’s look back at the questions we asked when you first met Nick Frank and his business at the end of October:

  1. How much money did Nick make or lose during his first month in business?
  2. Nick wants to buy another truck for $5,000 in order to keep up with demand—does he have enough cash in the bank to do that right now?
  3. How much do customers owe Nick?
  4. How much does Nick owe to his suppliers?
  5. What is Nick’s equity in his business at the end of October?

Now we should be able to answer these questions by creating some basic financial statements from the adjusted trial balance.

The Accounting Cycle

  1. Analyze Transactions
  2. Prepare Journal Entries
  3. Post Journal Entries
  4. Prepare Unadjusted Trial Balance
  5. Make Adjusting Journal Entries
  6. Prepare Adjusted Trial Balance
  7. Prepare Financial Statements
  8. Prepare Closing Entries
  9. Prepare Post-Closing Trial Balance
  10. Create and Post Reversing Entries, if needed