Question:
Why are financial statements prepared in a specific order? What is that order?
Financial Statements
Financial statements are records that convey business activities and the performance of a company. They are either prepared using the Generally Acceptable Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS). This makes sure that they can be compared.
Answer and Explanation:1
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Financial statements are prepared in a specific order; that is the income statement, followed by balance sheet and, then, the statement of...
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comprehensive income. All transactions in a company are entered into the general ledgers which produces a trial balance. The trial balance is used for all other financial statements: the income statement, the balance sheet, and the statement of cash flow.
Financial statements are chronological because the information from one statement is used as an input for another. From the trial balance, we begin with the income statement, then the balance sheet, which depends on the profit figure from the income statement, and, finally, the statement of cash flow, which depends on the balance sheet figures. Other statements follow similarly.
