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In preparing final accounts, which statement is prepared first?
In preparing final accounts, which statement is prepared first?
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Practice Questions
1 question
Q1
In preparing final accounts, which statement is prepared first?
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Changes in Equity
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The Income Statement is prepared first to determine the profit or loss, which is then used in the Balance Sheet.
Questions & Step-by-step Solutions
1 item
Q
Q: In preparing final accounts, which statement is prepared first?
Solution:
The Income Statement is prepared first to determine the profit or loss, which is then used in the Balance Sheet.
Steps: 5
Show Steps
Step 1: Understand that final accounts include two main statements: the Income Statement and the Balance Sheet.
Step 2: Know that the Income Statement shows the company's revenue and expenses to calculate profit or loss.
Step 3: Prepare the Income Statement first to find out if the company made money or lost money.
Step 4: Use the profit or loss from the Income Statement to help prepare the Balance Sheet.
Step 5: Remember that the Balance Sheet shows the company's assets, liabilities, and equity at a specific point in time.
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