Question

Which of the basic financial statements can be directly tied to the post-closing trial balance? Why is this so?

a) Income Statement; it summarizes revenues and expenses
b) Balance Sheet; it reflects the financial position after closing entries
c) Statement of Cash Flows; it details cash transactions during the period
d) Retained Earnings Statement; it shows changes in retained earnings

Answer 1

The Balance Sheet is the financial statement that can be tied to the post-closing trial balance because it reflects the financial position using the permanent accounts (option b), which are carried over into the next accounting period.

Step-by-step explanation:

The basic financial statement that can be directly tied to the post-closing trial balance is the Balance Sheet. This is because the post-closing trial balance includes only the permanent accounts whose balances are carried over into the next accounting period. Notably, the Balance Sheet reflects the company's financial position after the temporary accounts have been closed through closing entries.


Therefore, the connection between the post-closing trial balance and the Balance Sheet exists because they both deal with the real and permanent accounts that the company carries forward. In contrast, the Income Statement, Statement of Cash Flows, and Retained Earnings Statement involve temporary accounts such as revenues, expenses, and dividends, which are reset to zero and do not appear on the post-closing trial balance.