Question

multiple select question
select all that apply
review the following statements and determine which are correct regarding an adjusted trial balance and how it is used in preparing financial statements.

the income statement is the first financial statement prepared after preparing the adjusted trial balance
the ending retained earnings account balance on the balance sheet is transferred from the adjusted trial balance.
the balance sheet is the first financial statement prepared.
the ending retained earnings account balance on the balance sheet is taken from the statement of retained earnings.
the post-closing trial balance includes all accounts and balances appearing in financial statements.
financial statements are easier to prepare using the adjusted trial balance than the general ledger.

Explanation:

1. After the adjusted trial balance, the income statement is prepared first to calculate net income, which feeds into retained earnings.
2. The ending retained earnings balance on the balance sheet comes from the Statement of Retained Earnings (which uses net income from the income statement and beginning retained earnings), not the adjusted trial balance.
3. The adjusted trial balance summarizes all account balances in one place, eliminating the need to pull individual amounts from the general ledger, making financial statement preparation simpler.
4. Incorrect options: The balance sheet is not prepared first; post-closing trial balance only includes permanent accounts (not temporary income statement accounts); ending retained earnings does not come directly from the adjusted trial balance.

Answer:

• The income statement is the first financial statement prepared after preparing the adjusted trial balance
• The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings.
• Financial statements are easier to prepare using the adjusted trial balance than the general ledger.