Once The Adjusted Trial Balance Is Balanced, It Can Be Used To Prepare The

The correct choice is (b), as after the preparation of Unadjusted Trial Balance, there is a need to make Adjustments to the accounts due to Accruals And Deferrals at the end of the period. After that Adjusted Trial Balance is prepared completely to reflect updated balances of accounts. Then we are in a position to prepare Financial Statements which include Income Statement, Statement of Stockholders’ Equity and classified balance sheet. Income statement shows Net Income or Net Loss for the period. Net income is the excess of revenues over expenses during the accounting period while net loss is occurred when expenses are greater than revenues for the current period. A classified Balance shows the equality of balances of assets, liabilities and equity on a particular day which may change on the next day. A statement of shareholders’ equity shows the changes or movements of equity over a period of time i.e., from the beginning to the year’s end. This statement shows information about share capital, net income or loss for the period, dividends paid out of profits to stockholders and retained earnings, which is retained in the business after meeting all the expenses of the business and dividends paid.

After the preparation of adjusted trial balance, the post-closing trial balance is prepared for Permanent Accounts, which include Assets, liabilities and Owners’ Equity, to be shown in the financial statement of the next accounting period as permanents accounts having balances and are not closed until the business is closed. All the temporary accounts are closed to Income Summary Account in closing ending process.