Which is the correct sequence for recording transactions and preparing financial statements?

Question

BlackTom AI · Accepted Answer

To tackle the question about the correct sequence for recording transactions and preparing financial statements, I’ll evaluate each option in turn.
Option 1: 'Journal, ledger, trial balance, financial statements' This aligns with standard accounting workflow: first journals record the initial transactions, then postings move amounts to the ledger, followed by preparing a trial balance to verify arithmetic accuracy, and finally producing the financial statements from the adjusted and summarized ledger data. This sequence is correct and reflects traditional accounting processes.
Option 2: 'Financial statements, trial balance, ledger, journal' This order is incorrect because financial statements are the end product and cannot be prepared before the underlying data (journal entries, ledgers, and trial balance) have been recorded and verified. Skipping ahead to financial statements before completing the earlier steps breaks the logical flow of data accumulation and verification.
Option 3: 'Ledger, journal, financial statements, trial balance' This arrangement places the ledger before the journal, which is inconsistent with how transactions are originally captured. Ledgers rely on journal entries as their source, so posting to ledgers must follow recording in journals. Additionally, presenting a trial balance after financial statements is out of sequence, since the trial balance serves to verify accuracy prior to compiling statements.
In summary, only the first option follows the conventional progression from recording (journal) to summarizing (ledger), validating accuracy (trial balance), and compiling the final reports (financial statements). The other options attempt to reorder stages in ways that disrupt data flow and verification.

Introduction to Financial Accounting M2: Quiz

Which is the correct sequence for recording transactions and preparing financial statements?

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