Why should the income statement be prepared first?
A)The statement of cash flows should be prepared first because it determines the sources of cash.That information is then used in preparing the income statement.
B)Net income from the income statement flows into the retained earnings statement.The ending retained earnings balance then flows into the balance sheet.
C)The income statement does not have to be prepared first.Financial statements can be prepared in any order.
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Net income from the income statement is needed to prepare the retained earnings statement, which in turn is needed to complete the balance sheet.

Why Should the Income Statement Be Prepared First