Great work learning about adjusting entries! Now you have adjusted account balances that reflect economic reality. But what do you do with all these balances next?

Time to organize them into financial statements - the final reports that tell your business story!

Engagement Message

Why do you think organizing account balances into statements matters?

Think of your adjusted account balances like ingredients scattered on a kitchen counter. You have everything you need, but it's not organized into a meal yet.

Financial statements are like different dishes - each one tells a specific part of your business story.

Engagement Message

What do you think these different "dishes" (financial statements) might tell us about a business?

There are four primary financial statements that businesses prepare: Income Statement, Balance Sheet, Statement of Owner's Equity, and Statement of Cash Flows.

Each statement answers a different question about your business performance and position.

Engagement Message

Which financial statement do you think shows whether the business made money or lost money?

The Income Statement shows revenues and expenses - did you make or lose money this period?

The Balance Sheet shows assets, liabilities, and owner's equity - what do you own and owe right now?

Engagement Message

Based on what we learned about the accounting equation, which statement would show Assets = Liabilities + Owner's Equity?

Here's the key insight: your adjusted account balances get sorted into these different statements based on what type of account they are.

Revenue and expense accounts → Income Statement
Asset, liability, and equity accounts → Balance Sheet