What is the fourth step in the accounting cycle?

• A. Prepare a trial balance
• B. Prepare post-closing trial balance
• C. Close temporary accounts
• D. Prepare financial statements

Answer: (A)

The step being tested is the order of the accounting cycle and where the trial balance fits in. After recording transactions and posting them to the ledgers, you prepare a trial balance to verify that total debits equal total credits and to summarize the balances of all accounts. This check is essential before making any adjusting entries, so the trial balance is positioned as the fourth step in the cycle. By confirming the ledger is in balance, you have a solid starting point for adjustments, then for preparing financial statements, closing temporary accounts, and eventually generating a post-closing trial balance.