Which of the Following Describes the Correct Order of How

question 37

Multiple Choice

Which of the following describes the correct order of how financial statements are prepared from the information taken from the trial balance?

• A) Compute net income, Identify all revenues and expenses, Compute the ending retained earnings balance, Prepare a balance sheet
• B) Identify all revenues and expenses, Prepare a balance sheet, Compute the ending retained earnings balance, Compute net income
• C) Compute the ending retained earnings balance, Compute net income, Prepare a balance sheet, Identify all revenues and expenses.
• D) Identify all revenues and expenses, Compute net income, Compute the ending retained earnings balance, Prepare a balance sheet.

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Definitions:

Statement of Stockholders' Equity

A financial report detailing changes in the equity section of the balance sheet, including shares, dividends, and earnings over a period.

Closing Entry

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.