The statement of owner's equity is prepared before the balance sheet so that the ending owner's capital balance is available for the balance sheet.

Question

Quizplus · Accepted Answer

The statement of owner's equity shows how the owner's capital balance changed over the accounting period, including any investments, withdrawals, and net income or loss. This ending balance is then used to prepare the balance sheet, which shows the financial position of the business at a specific point in time. Therefore, the statement of owner's equity is prepared before the balance sheet to ensure that the correct ending capital balance is reported on the balance sheet.

The Statement of Owner's Equity Is Prepared Before the Balance