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LE Prep . HOW DO WE PREPARE FINANCIAL STATEMENTS (STEP 4)? After a company prepares and posts the adjusting entries to the general ledger accounts, it prepares its financial statements as follows: Step 1. The balance of each account in the ledger is recomputed if necessary to reflect the effects of the adjusting entries. Step 2. An adjusted trial balance is prepared, listing all the accounts and account balances after adjustments (but before closing) in cither a debit or a credit column. The adjusted trial balance is used to verify that the debit balances total is equal to the credit balances total. Example 3.5 shows Jaymie Corporation's adjusted trial balance. Step 3. The income statement and balance sheet are prepared in sequential order directly from the information in the adjusted trial balance. . EXAMPLE 3.5 Adjusted Trial Balance JAYMIE CORPORATION Adjusted Trial Balance December 31, 2019 Credit Debit $ 2,922 7,000 $ 170 1,320 66 2,010 90 1,500 15,320 264 2,120 Cash Accounts Receivable Allowance for Doubtful Accounts Notes Receivable Interest Receivable Inventory Prepaid Insurance Land Building Accumulated Depreciation Building Equipment Accumulated Depreciation: Equipment Accounts Payable Notes Payable Salaries Payable Interest Payable Income Taxes Payable Unearned Rent Common Stock Retained Earnings Dividends Sales Revenue Interest Income Rent Income Cost of Goods Sold Salaries Expense Other Expenses Loss on Sale of Land Depreciation Expense: Building 120 1,900 6,600 900 594 600 300 20,000 0 500 17,000 66 150 10,490 2,700 428 180 264

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