Question

Which of the following is prepared first? A. Balance sheet B. Income statement C. Statement of owner’s equity D. Trial balance

Answer 1

B. Income statement

Step-by-step explanation:

Step 1: From the Income Statement, the Net Income is used for the Statement of Retained Earnings.
Step 2: From the Statement of Retained Earnings, the retained earnings is used for the Balance Sheet.
Step 3: From the Balance Sheet the Cash from Assets is used for the Cash Balance in Statement of Cash Flows

Therefore, Income statement is prepared first.

Answer 2

The income statement is prepared first. The income statement is a financial statement that reports the company's financial performance (profit and loss) over a specific accounting period. It describes how the business incurs its revenues and expenses, and it is also referred as profit and loss statement (P&L). With help of this report management knows if the business made money during the period reported.