Question

In: Accounting

The income statement should be prepared after the balance sheet and before the retained earnings statement...

The income statement should be prepared

after the balance sheet and before the retained earnings statement

after the retained earnings statement and before the balance sheet

before the retained earnings statement and balance sheet

after the retained earnings statement and balance sheet

Solutions

Expert Solution

C) before the retained earnings statement and the balance sheet.

(Because the retained earnings will be affected by the amount of profit/loss which is derived from the income statement. If a profit occurs retained earnings will increase as profit will be added to it. If a loss occurs retained earnings will decrease as loss will be deducted from it. Finally, after adjusting the retained earnings with the appropriate profit or loss it will be shown on the balance sheet under stockholder's equity. Therefore income statement is prepared first.)


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