Question

The process to go from transactions and events to financial statements begins with?

1) Recording transactions
2) Preparing trial balance
3) Adjusting entries
4) Preparing financial statements

Answer 1

The process of creating financial statements begins with recording transactions, which is the first step in the accounting cycle that ultimately leads to the preparation of financial statements.

Step-by-step explanation:

The process of going from transactions and events to financial statements begins with the recording of those transactions. This is commonly referred to as bookkeeping, which is the first step in the accounting cycle. The step-by-step process typically includes the following:

1. Recording transactions: Each financial transaction is recorded in a journal as a journal entry.
2. Preparing a trial balance: This is a report that lists the balances of all ledger accounts at a point in time.
3. Adjusting entries: These are made at the end of the accounting period to allocate income and expenditure to the correct periods.
4. Preparing financial statements: Finally, financial statements like the income statement, balance sheet, and statement of cash flows are prepared, which summarize the financial activities of the business.

Therefore, the correct answer to the student's question is 1) Recording transactions.