Debra, Inc. is preparing its annual financial statements based on its adjusted trial balance. Which financial statement will Debra, Inc. prepare first?
A) Statement of financial position.
B) Income statement.
C) Retained earnings statement.
D) There is no particular order, any financial statement may be prepared first once the adjusted trial balance is prepared.

Question

Quizplus · Accepted Answer

The income statement is typically prepared first because it provides the net income or loss, which is needed to prepare the retained earnings statement, which in turn is needed to prepare the statement of financial position.