Which of the following is the correct order of preparation of financial statements?
A) Income statement → statement of retained earnings → balance sheet → statement of cash flows
B) Statement of retained earnings → balance sheet → income statement → statement of cash flows
C) Balance sheet → statement of retained earnings → income statement → statement of cash flows
D) Balance sheet → income statement → statement of retained earnings → statement of cash flows

Question

Quizplus · Accepted Answer

The correct order of preparation of financial statements starts with the income statement, which calculates the net income or loss. This figure is then used in the statement of retained earnings, followed by the balance sheet, which reflects the company's financial position. Finally, the statement of cash flows is prepared, which shows how changes in the balance sheet and income affect cash and cash equivalents.

Which of the Following Is the Correct Order of Preparation