Where does the information for a company's financial statement come from?

Where does the information for a company's financial statement come from?

• A. Trial balance
• B. Income statement
• C. Summary of accounts in the general ledger
• D. Balance sheet

Answer: (C)

Financial statements are built from the balances kept in the general ledger. Each transaction is posted to the appropriate accounts in the ledger, creating up-to-date balances for assets, liabilities, equity, revenues, and expenses. Those balances are then summarized into the overall headings used in financial statements, and from them the income statement and balance sheet are prepared. The trial balance is just a check that the ledger remains in balance; it helps verify accuracy before producing the statements, but it isn’t the primary source of the information. So the best source of the data for financial statements is the summary of accounts in the general ledger.