Question

Which of the following is the correct order of preparing the financial statements?

A. income statement, statement of cash flows, balance sheet, statement of owner’s equity
B. income statement, statement of owner’s equity, balance sheet, statement of cash flows
C. income statement, balance sheet, statement of owner’s equity, statement of cash flows
D. income statement, balance sheet, statement of cash flows, statement of owner’s equity

Answer 1

The correct order of preparing financial statements is: income statement, balance sheet, statement of cash flows, statement of owner's equity.

Step-by-step explanation:

The correct order of preparing the financial statements is option D: income statement, balance sheet, statement of cash flows, statement of owner’s equity.

The income statement shows the company's revenues and expenses over a specific period of time. The balance sheet presents the company's assets, liabilities, and owner's equity at a specific point in time. The statement of cash flows provides information about the cash inflows and outflows during a specific period. Lastly, the statement of owner’s equity displays the changes in the owner's equity during a specific period.