Which of the following best describes the purpose of an adjusted trial balance prepared at December 31 for Wilson Trucking Company?

• A. To verify that total debits equal total credits after all adjusting entries have been made.
• B. To determine the amount of taxes owed for the year.
• C. To prepare the statement of cash flows directly.
• D. To record all cash transactions for the year.

Answer: (A)

Verified step by step guidance

1. Understand the concept of an adjusted trial balance: An adjusted trial balance is prepared after all adjusting entries have been made at the end of an accounting period. Its primary purpose is to ensure that the ledger accounts are balanced and ready for financial statement preparation.
2. Review the purpose of adjusting entries: Adjusting entries are made to account for accrued revenues, accrued expenses, prepaid expenses, depreciation, and other adjustments necessary to reflect the true financial position of the company.
3. Recognize the role of the adjusted trial balance: The adjusted trial balance is used to verify that total debits equal total credits after adjustments. This ensures the accuracy of the accounting records before preparing financial statements.
4. Eliminate incorrect options: The adjusted trial balance is not used to determine taxes owed, prepare the statement of cash flows directly, or record cash transactions. These tasks are separate from the purpose of the adjusted trial balance.
5. Conclude the correct purpose: The adjusted trial balance is specifically prepared to verify that total debits equal total credits after all adjusting entries have been made, ensuring the accuracy of the financial data for statement preparation.