Question

In what order must you produce these 3 reports: statement of retained earnings, balance sheet, income statement?

1) statement of retained earnings, balance sheet, income statement
2) balance sheet, income statement, statement of retained earnings
3) income statement, balance sheet, statement of retained earnings
4) income statement, statement of retained earnings, balance sheet

Answer 1

The correct order to produce the 3 reports is balance sheet, income statement, statement of retained earnings.

Step-by-step explanation:

The correct order to produce these 3 reports is 2) balance sheet, income statement, statement of retained earnings.

The balance sheet provides a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and owner's equity. The income statement summarizes a company's revenues, expenses, and net income or loss for a specific period of time. The statement of retained earnings shows the changes in a company's retained earnings over a period of time.

Producing the balance sheet first is important because it provides the necessary information to prepare the income statement. The income statement is then used to calculate the ending retained earnings, which is reported in the statement of retained earnings.