our financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

Question

Business

Stephany Wells

9 November, 00:02

our financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

+3

Answers (1)

Know the Answer?

Kelsie Graham · Answer 1

1. Income statement

2. Statement of owner's equity

3. Balance sheet

Explanation:

The income statement which shows the income and expenditure transactions for a particular accounting period is prepared first.

The statement of owner's equity is then prepared second. This statement indicates the movement in retained earnings between the beginning and end of the accounting period. The change in retained earnings is obtained from the profit or loss for the period derived in the income statement.

The balance sheet which is a snapshot of a company's assets, liabilities and equity as at the end of the accounting period is prepared third. Equity balances included in the balance sheet are derived from the statement of owner's equity.