Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?
A) I,OE, B
B) B, I, OE
C) OE, I, B
D) B,OE, I

Question

Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?
A) I,OE, B 
B) B, I, OE
C) OE, I, B
D) B,OE, I

Quizplus · Accepted Answer

The income statement (I) is prepared first to determine the net income or loss. This information is then used in the statement of owner's equity (OE) to adjust the owner's capital account for the period. Finally, the updated owner's equity figure is needed for the balance sheet (B), which is prepared last among these three.

Four Financial Statements Are Usually Prepared for a Business