Prepare income statements and statements of financial position from a trial balance including adjustments from accounting concepts
A trial balance lists every account balance a business holds. You use it as your starting point to build the two main financial statements, after making corrections for things like unpaid bills or depreciation.
Formula
Net Assets = Non-Current Assets + Current Assets − Current Liabilities − Non-Current Liabilities
Real World
A sole trader running a bakery uses her year-end trial balance to spot that electricity is accrued and insurance is prepaid, adjusting both figures before her statement of financial position correctly reflects what the business owes and owns.
Exam Focus
Always transfer adjusted figures — not raw trial balance figures — into your financial statements; unadjusted balances are the most common exam error.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
How well did you know this?