Which step occurs after the adjusted trial balance and before the financial statements?

• A. Financial statements are prepared.
• B. An adjusted trial balance is prepared.
• C. A post-closing trial balance is prepared.
• D. Transactions are posted to the ledger.

Answer: (A)

After adjusting entries have been posted, the adjusted trial balance provides the final updated balances used to report the company’s results and financial position. The next step is to prepare the financial statements, since these statements summarize performance and status directly from those updated balances (income statement from revenues and expenses, balance sheet from assets, liabilities, and equity, plus the statements of retained earnings or cash flows as applicable). Only after the financial statements are prepared do you close the temporary accounts and then generate a post-closing trial balance to confirm the accounts balance again. Transactions are posted to the ledger earlier in the cycle, long before the adjusted trial balance is created.