Why do businesses have to prepare financial statements? What is the purpose of a trial balance...

Why do businesses have to prepare financial statements? What is the purpose of a trial balance and an income statement?

Expert Solution

Purpose to prepare financial statement The general purpose of the financial statements is to provide information about the results of operations, financial position, and cash flows of an organization. This information is used by the readers of financial statements to make decisions regarding the allocation of resources.

Purpose to trial balance

Preparation of trial balance is the third phase in the accounting process.Aftrer posting the accounts in the ledger, a Statement is prepared to show separately the dibit and credit balances. Such a statement is known as trial balance.

Trial balance enables whether the posting and other accounting processes have been carried out without arthimetical errors. In other words trial balance helps to establish arthimetical accuracy of books.

Purpose of income statement

An income statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.

ekkarill92 answered 2 years ago

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After the trial balance is prepared, the business owner can prepare the financial statements. List and...

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