Again, this is prepared to verify that all of the debits and credits equal.
Once this has been completed, the next step would be to prepare the financial statements. Information from the adjusted trial balance is used to prepare an income statement, a statement of owner's equity, and a balance sheet. An income statement is a summary of the revenue and expense accounts for a given time period. The statement of owner's equity shows the changes of the owner's equity for a given time period. This may include additional investments as well as withdraws. The balance sheet is a listing of all assets, liabilities, and owner's equity for a given time period. The financial statements are produced in that order as information from the income statement is used to complete the statement of owner's equity and the information from the statement of owner's equity is used to complete the balance sheet.
The next step would be to journalize and post the closing entries. The closing entries are prepared after the financial statements are completed. The purpose of the closing entries is to prepare the accounts for the next reporting cycle.
The final...
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