Question

The income statement should be prepared
a. after the retained earnings statement and balance sheet
b. after the balance sheet and before the retained earnings statement
c. after the retained earnings statement and before the balance sheet
d. before the retained earnings statement and balance sheet

Answer 1

Answer: D

Explanation: Income Statement should be prepared before the retained earnings statement and balance sheet because the net profit calculated in the income statement serves as raw data and an input to the statement of retained earnings and balance sheet.