Once a company has prepared an adjusted trial balance it is ready to prepare financial statements. Which financial statement is prepared first, second, then third?

a. First the income statement is prepared, then the retained earnings statement is prepared, finally the balance sheet is prepared.

b. First the balance sheet is prepared, then the retained earnings is prepared, finally the income statement is prepared.

c. First the income statement is prepared, then the balance sheet is prepared, finally the retained earnings statement is prepared.

d. First the retained earnings statement is prepared, then the balance sheet is prepared, finally the income statement is prepared.

Question

Business

Jensen

1 May, 13:49

Once a company has prepared an adjusted trial balance it is ready to prepare financial statements. Which financial statement is prepared first, second, then third?

a. First the income statement is prepared, then the retained earnings statement is prepared, finally the balance sheet is prepared.

b. First the balance sheet is prepared, then the retained earnings is prepared, finally the income statement is prepared.

c. First the income statement is prepared, then the balance sheet is prepared, finally the retained earnings statement is prepared.

d. First the retained earnings statement is prepared, then the balance sheet is prepared, finally the income statement is prepared.

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Answers (1)

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Precious Navarro · Answer 1

A

Explanation:

There is a sequence of preparing statements of financial statements because some statements use information from other statements of financial position. The income statement does not require information from any other statements. The retained earnings need information from income statement to calculate current retained earnings. The balance sheets require information from statement of retained earnings (retained earnings for this period).