Question

Which financial statements does a business prepare after making adjustments to the trial balance? the business prepares financial statements like and after making necessary adjustments to the trial balance.

Answer 1

A business prepares the income statement, statement of retained earnings, balance sheet, and statement of cash flows after making adjustments to the trial balance. These adjustments ensure the accuracy of the financial statements in reflecting the company's financial performance and position.

Step-by-step explanation:

After making necessary adjustments to the trial balance, a business prepares four primary financial statements: the income statement, statement of retained earnings, balance sheet, and statement of cash flows. These reports reflect the company's financial performance over a specific period (income statement, statement of retained earnings, cash flows) and its financial position at a point in time (balance sheet).

Income Statement

The income statement shows the company's revenues, expenses, and net profit or loss over the reporting period. It gives stakeholders insights into the company's operational efficiency and profitability. Adjustments such as bad debt expense and depreciation are made to account for the accurate measures of income.

Statement of Retained Earnings

The statement of retained earnings reconciles the beginning and ending retained earnings for the period, reflecting changes due to net income and dividends. It essentially communicates how much of the profits were reinvested in the business versus distributed to shareholders.

Balance Sheet

The balance sheet details the company's assets, liabilities, and shareholders' equity at a specific point in time. It is adjusted to realign the totals due to the recognized revenues and expenses, revealing the company's net worth in terms of book value.

Statement of Cash Flows

The statement of cash flows tracks the inflows and outflows of cash within the business in operating, investing, and financing activities. It is crucial for assessing the liquidity and long-term solvency of the enterprise.

Answer 2

After making adjustments to the trial balance, a business prepares financial statements like the income statement, balance sheet, and statement of cash flows.

The income statement shows the revenues and expenses of a business during a specific period, such as a month or a year. It helps determine the net income or loss of the business.

The balance sheet provides information about a business's assets, liabilities, and shareholders' equity at a specific point in time. It shows the financial position of the business.

The statement of cash flows reports the cash inflows and outflows of a business during a specific period. It provides information on how cash is generated and used by the business.