The income statement should be prepared
A) before the retained earnings statement and balance sheet
B) after the retained earnings statement and before the balance sheet
C) after the retained earnings statement and balance sheet
D) after the balance sheet and before the retained earnings statement

Question

Quizplus · Accepted Answer

The income statement is the first financial statement to be prepared in the accounting cycle, followed by the retained earnings statement and balance sheet. This order ensures that net income or loss from the income statement flows to the retained earnings statement and then onto the balance sheet.

The Income Statement Should Be Prepared