Question

The operating budget requires the preparation of many detailed budgets and the budgeted financial statements. Identify the sequential order in which the budgeted financial statements must be prepared.

Instructions

Answer 1

The sequential order in which the budgeted financial statements must be prepared is: Income Statement, Statement of Retained Earnings, Balance Sheet, and Cash Flow Statement.

Step-by-step explanation:

1. The sequential order in which the budgeted financial statements must be prepared is:
   1. Income Statement: The income statement shows the revenues earned and expenses incurred during a specific period. It provides information about the profitability of the business.
   2. Statement of Retained Earnings: The statement of retained earnings shows the changes in the retained earnings account, which represents the accumulated profits or losses of the business.
   3. Balance Sheet: The balance sheet shows the financial position of the business at a specific point in time. It provides information about the assets, liabilities, and equity of the business.
   4. Cash Flow Statement: The cash flow statement shows the cash inflows and outflows during a specific period. It helps analyze the cash flow activities of the business.