Questions: 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. Financial statements are easier to prepare using the adjusted trial balance than the general ledger. The post-closing trial balance includes all accounts and balances appearing in financial statements. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. The balance sheet is the first financial statement prepared. 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.

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. Financial statements are easier to prepare using the adjusted trial balance than the general ledger. The post-closing trial balance includes all accounts and balances appearing in financial statements. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. The balance sheet is the first financial statement prepared. 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.
Transcript text: 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. Financial statements are easier to prepare using the adjusted trial balance than the general ledger. The post-closing trial balance includes all accounts and balances appearing in financial statements. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. The balance sheet is the first financial statement prepared. 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.
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Solution

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The correct statements regarding an adjusted trial balance and how it is used in preparing financial statements are:

  1. Financial statements are easier to prepare using the adjusted trial balance than the general ledger.

    • Correct. The adjusted trial balance provides a summary of all account balances after adjustments, making it easier to prepare financial statements.

  2. The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings.

    • Correct. The ending balance of Retained Earnings is calculated in the Statement of Retained Earnings and then reported on the Balance Sheet.

  3. The income statement is the first financial statement prepared after preparing the adjusted trial balance.

    • Correct. The income statement is typically prepared first because its net income or loss is needed to update the Retained Earnings in the Statement of Retained Earnings.

Explanation for Incorrect Statements:

  • The post-closing trial balance includes all accounts and balances appearing in financial statements.

    • Incorrect. The post-closing trial balance only includes permanent accounts (assets, liabilities, and equity) and excludes temporary accounts (revenues, expenses, dividends).

  • The balance sheet is the first financial statement prepared.

    • Incorrect. The income statement is prepared first, followed by the Statement of Retained Earnings, and then the Balance Sheet.

  • The ending Retained Earnings account balance on the balance sheet is transferred from the adjusted trial balance.

    • Incorrect. The ending Retained Earnings balance is derived from the Statement of Retained Earnings, not directly from the adjusted trial balance.
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