The financial statements show the financial position and the operating results of the business at the particular time or particular period.They are the main source of financial information to persons outside the business organization and also are useful to management.It is easy to start preparing financial statement directly from information in the adjusted trial balance.For an adjusted trial balance includes all accounts and balances appearing in financial statement.

The basic financial statements include the balance sheet，the income statement，and the statement of cash flow.We usually prepare financial statements in the following order:income statement，statement of retained earnings，and balance sheet.This order makes sense since the balance sheet uses information from the statement of retained earnings，which in turn uses information from the income statement.The statement of cash flows is usually the final statement prepared.

Table 10-1

续表

Step 1Prepare Income Statement

Step 2Prepare Statement of Retained Earnings

Step 3Prepare Balance Sheet