Which financial statements are prepared from the adjusted trial balance?

• A. Income Statement, Balance Sheet, and Statement of Cash Flows
• B. Income Statement, Statement of Changes in Equity, and Balance Sheet
• C. Cash Flow Statement, Income Tax Return, and Balance Sheet
• D. Statement of Comprehensive Income, Balance Sheet, and Retained Earnings

Answer: (B)

The adjusted trial balance lists all accounts with their balances after adjusting entries, and serves as the source for the main financial statements. From it you pull revenues and expenses to determine net income for the Income Statement. You use asset, liability, and equity balances to prepare the Balance Sheet. The changes in equity during the period, including the impact of net income and any distributions, are shown on the Statement of Changes in Equity. The cash flow statement isn’t produced directly from the adjusted trial balance; it’s derived from cash-related data across the statements and additional disclosures. So, the three statements prepared from the adjusted trial balance are the Income Statement, the Balance Sheet, and the Statement of Changes in Equity.