Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The retained earnings statement (RE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

Question

Quizplus · Accepted Answer

The income statement is prepared first to determine net income, which is needed for the retained earnings statement. The retained earnings statement is prepared next to determine the ending retained earnings balance, which is needed for the balance sheet. Finally, the balance sheet is prepared.

Four Financial Statements Are Usually Prepared for a Business