Question

Adjusted Trial Balance

1. Verbally give four (4) examples of the types of adjustment needed.   

2. Once the adjustments are made, verbally explain what do you do with the ATB   

Create financial statements (FS) from the Adjusted Trial Balance (ATB)

1. Verbally name the FS’s created from the ATB

2. Verbally explain how each FS’s are created from the ATB

3. For each of the FS’s,
   1. Verbally list the major sections
   2. Verbally name the accounts in each section

Answer 1

1. There are four main types of adjustments you can make to your trial balance:

1. Deferrals remove transactions that do not belong to the period you’re creating a financial statement for (e.g. an advanced payment from a customer).

2. Accruals make sure that the financial statements you’re preparing now take into account any future payments and expenses (e.g. rent you owe a landlord and haven’t paid yet).

3. Missing transaction adjustments account for the transactions you forgot about while bookkeeping (e.g. a business purchase on your personal credit card).

4. Tax adjustments help you account for things like depreciation and other tax deductions.

2. Once you have a completed the adjusted trial balance, creating the three major financial statements—the balance sheet, the cash flow statement and the income statement—is fairly straightforward.

1. Using information from the revenue and expense account sections of the trial balance, you can create an income statement.

2. Using information from the asset, liability and equity accounts in the trial balance, you can prepare a balance sheet.

3. Finally, you can prepare a statement of cash flows using information found in any of the accounts that interacts with the cash accounts in the trial balance.