The normal order in which the financial statements are prepared is:
A)Balance sheet,income statement,statement of retained earnings.
B)Income statement,statement of retained earnings,balance sheet.
C)Income tax return,income statement,balance sheet.
D)Income statement,statement of cash flows,balance sheet.

Question

Quizplus · Accepted Answer

The income statement is prepared first as it shows the company's financial performance over a period of time. The statement of retained earnings is prepared next as it shows how the company's earnings were distributed during the period. Finally, the balance sheet is prepared as it shows the company's financial position at the end of the period, taking into account all assets, liabilities, and equity. So, the correct order is income statement, statement of retained earnings, and then the balance sheet.

The Normal Order in Which the Financial Statements Are Prepared