Question

Describe the progression of the three trial balances that a company would have during the period, and explain the difference between the three.

a) Initial Trial Balance, Adjusted Trial Balance, Post-Closing Trial Balance; each reflects different stages of the accounting cycle
b) Adjusted Trial Balance, Initial Trial Balance, Post-Closing Trial Balance; each serves a specific purpose in financial reporting
c) Initial Trial Balance, Post-Closing Trial Balance, Adjusted Trial Balance; each highlights different aspects of the company's financial status
d) Adjusted Trial Balance, Post-Closing Trial Balance, Initial Trial Balance; each contributes to the preparation of financial statements

Answer 1

Three types of trial balances in financial reporting are the Initial Trial Balance, Adjusted Trial Balance, and Post-Closing Trial Balance, each representing a different stage in the accounting cycle with a specific purpose.

Step-by-step explanation:

During the accounting cycle, a company will typically prepare three different types of trial balances: the Initial Trial Balance, the Adjusted Trial Balance, and the Post-Closing Trial Balance. Each of these serves a unique purpose in the financial reporting process, reflecting different stages of accounting.

• Initial Trial Balance: Compiled at the end of an accounting period, this trial balance lists all balances from the general ledger before any adjustments are made. It serves to verify that total debits equal total credits.
• Adjusted Trial Balance: This trial balance is prepared after adjusting entries have been made and posted to the ledger. It reflects the company's financial position considering all accruals, allocations, and estimations for the period.
• Post-Closing Trial Balance: Developed after closing entries are completed, this trial balance ensures that all temporary accounts have been reset and that the ledger is ready for the next accounting period. Only permanent account balances are included.

An accurate selection that describes the progression of the three trial balances that a company would have during the period is: a) Initial Trial Balance, Adjusted Trial Balance, Post-Closing Trial Balance; each reflects different stages of the accounting cycle.