Prepare Financial Statements Using the Adjusted Trial Balance - Principles of Accounting, Volume 1_

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3/7/2020Prepare Financial Statements Using the Adjusted Trial Balance - Principles of Accounting, Volume 1: Financial Accounting - OpenStax1/20Once you have prepared the adjusted trial balance, you are ready to prepare the financial statements.Preparing financial statements is the seventh step in the accounting cycle. Remember that we have fourfinancial statements to prepare: an income statement, a statement of retained earnings, a balance sheet,and the statement of cash flows. These financial statements were introduced inIntroduction to FinancialStatementsandStatement of Cash Flowsdedicates in-depth discussion to that statement.To prepare the financial statements, a company will look at the adjusted trial balance for accountinformation. From this information, the company will begin constructing each of the statements, beginningwith the income statement. Income statements will include all revenue and expense accounts. Thestatement of retained earnings will include beginning retained earnings, any net income (loss) (found onthe income statement), and dividends. The balance sheet is going to include assets, contra assets,liabilities, and stockholder equity accounts, including ending retained earnings and common stock.YOUR TURNMagnificent Adjusted Trial BalanceGo over the adjusted trial balance for Magnificent Landscaping Service. Identify which financialstatement each account will go on: Balance Sheet, Statement of Retained Earnings, or IncomeStatement.SolutionBalance Sheet: Cash, accounts receivable, office supplied, prepaid insurance, equipment,accumulated depreciation (equipment), accounts payable, salaries payable, unearned lawnmowing revenue, and common stock. Statement of Retained Earnings: Dividends. IncomeStatement: Lawn mowing revenue, gas expense, advertising expense, depreciation expense(equipment), supplies expense, and salaries expense.Income StatementAn income statement shows the organization’s financial performance for a given period of time. Whenpreparing an income statement, revenues will always come before expenses in the presentation. ForPrinting Plus, the following is its January 2019 Income Statement.
3/7/2020Prepare Financial Statements Using the Adjusted Trial Balance - Principles of Accounting, Volume 1: Financial Accounting - OpenStax2/20Revenue and expense information is taken from the adjusted trial balance as follows:Total revenues are $10,240, while total expenses are $5,575. Total expenses are subtracted from totalrevenues to get a net income of $4,665. If total expenses were more than total revenues, Printing Plus
3/7/2020Prepare Financial Statements Using the Adjusted Trial Balance - Principles of Accounting, Volume 1: Financial Accounting - OpenStax

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Term
Winter
Professor
N/A
Tags
Balance Sheet, Trial Balance, Generally Accepted Accounting Principles, Financial Accounting Standards Board

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