ACCOUNTING CYCLE STEP 7: Use the accounts and balances on the adjusted trial balance to prepare financial statements. Refer to Exhibit 3.14 in your textbook for an illustration of how the numbers from an adjusted trial balance flow to the financial statements. No working papers have been provided for this step, so you may either handwrite your solution or prepare it electronically. If you prepare your solution electronically, be sure to bring a hardcopy to class. Helpful Hints The income statement is always prepared first because we need the output of the income statement (net income) to prepare the second financial statement, the statement of owner's equity. The statement of owner's equity must be prepared second because we need the output of the statement of owner's equity (the ending capital account balance) to prepare the third financial statement, the balance sheet. The fact that all three financial statements tie together in this way is referred to as articulation. Recall that the accounts on the adjusted trial balance are listed in financial statement order (assets, liabilities, owner's equity, revenues, and expenses), so the accounts you need for each statement are effectively grouped together. Each account is reported on only ONE financial statement. Specifically note the difference between the format of a trial balance and a balance sheet. Many beginning accounting students frequently confuse these two due to the naming similarity, but they are two very distinct documents! Check Figures: Net income = $983 Total Assets = $13,178 Account No. 201 ob Adjusted Trial Balance Blue Raider Adventure Rare Blue Powders Advent September 30" ACCOunt Name De Cxedil Cash 39201 Accounts Receivable 510 Suppiles 2761 Prepaid Insurance 410 E OUoment 1925 32 Accumulated Depreciation Equipert 7501 Sign Accumu cred Depreciation Sign Activity Courses 04 Accumulated Depreciation Activity COLLEGE $ 100 accounts Pavate Ines Ravable $ 120 Mnkarned Revenue 10 interest Payable 1000 NORCS Paydale 5000 M. Lapinskiomital 2001 Malapinski, Wiihdrawals 2535 Ticket Revenue 2002 Advertising Expense 291 Depreciation Expense 205 Insurance Expense 710 Interest Expense 15 Mowing Expense 182 Supplies Expense 495 Wages Expense $15.660a $15,669 Total