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(TCO D) What is the correct order to create the financial statements? A.) Balance sheet, income...

(TCO D) What is the correct order to create the financial statements?

A.) Balance sheet, income statement, statement of retained earnings, and statement of cash flows
B.) Statement of cash flows, balance sheet, statement of retained earnings, and income statement
C.) Income statement, statement of retained earnings, balance sheet, and statement of cash flows
D.) Income statement, balance sheet, statement of retained earnings, and statement of cash flows
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Answer #1
  • The correct answer is Option ‘C’ Correct order to create the financial statement is:

Income Statement, followed by Statement of retained earnings, then Balance Sheet and lastly Statement of Cash Flows.

  • Income Statement is prepared first because Net Income and Net Loss is to be computed which is used in Statement of Retained earnings.
  • Retained earnings ending balance as per Statement of RE is used in the Balance Sheet.
  • Balance Sheet figures are used to construct Statement of Cash Flows.
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