Final answer:
The step that comes just before preparing financial statements is recording adjusting entries, and the step immediately after is recording closing entries.
Step-by-step explanation:
In the accounting cycle, the step that comes just prior to preparing the financial statements is recording adjusting entries. These entries are made to update the accounts for revenues that have been earned but are not yet recorded and for expenses that have been incurred but are not yet recorded. Once the financial statements are prepared, the next step is to record the closing entries. Closing entries are used to transfer the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts (such as retained earnings). This process resets the balances of the temporary accounts to zero, readying them for the next accounting period.