Which of the following is NOT one of the four basic financial statements?

• A. Statement of Retained Earnings
• B. Statement of Cash Flows
• C. Balance Sheet
• D. Trial Balance

Answer: (D)

Verified step by step guidance

1. Understand the four basic financial statements: The Statement of Retained Earnings, Statement of Cash Flows, Balance Sheet, and Income Statement. These are the core financial reports used to summarize a company's financial performance and position.
2. Recognize that the Trial Balance is not a financial statement. It is an internal accounting report used to ensure that total debits equal total credits in the ledger accounts, serving as a preliminary check before preparing financial statements.
3. Differentiate between the Trial Balance and the financial statements. While the Trial Balance is a tool for accountants, the financial statements are formal reports shared with stakeholders, such as investors and creditors.
4. Review the purpose of each financial statement: The Statement of Retained Earnings shows changes in retained earnings, the Statement of Cash Flows tracks cash inflows and outflows, the Balance Sheet provides a snapshot of assets, liabilities, and equity, and the Income Statement reports revenues and expenses.
5. Conclude that the Trial Balance is not one of the four basic financial statements, as it serves a different purpose in the accounting process.