The Financial Statements Must Be Prepared in a Specific Order

question 4

Multiple Choice

The financial statements must be prepared in a specific order.What is that order and why do financial statements need to be prepared in that order?

• A)Profit and Loss,Balance Sheet and Statement of Cash Flows.This order is required since the net income obtained from the Profit and Loss statement is used to increase owners' equity on the Balance Sheet.The Balance Sheet's updated accounts are needed to prepare the Statement of Cash Flows.
• B)Balance Sheet,Profit and Loss and Statement of Cash Flows.This order is required since the total assets obtained from the Balance Sheet is used to increase revenue on the Profit and Loss.Net income is needed to prepare the Statement of Cash Flows.
• C)Statement of Cash Flows,Profit and Loss,and Balance Sheet.This order is required since the cash obtained from the Statement of Cash Flows is used to increase revenue and the Profit and Loss statement.Updated accounts from the Profit and Loss statement are needed to prepare the Statement of Cash Flows.
• D)Profit and Loss,Balance Sheet and Statement of Cash Flows.This order is required since the net income obtained from the Profit and Loss statement is used to increase assets on the Balance Sheet and the Balance Sheet's updated accounts are needed to prepare the Statement of Cash Flows.

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Definitions:

Different First Page

A feature in word processing software that allows the first page of a document, such as a title page, to have a different header or footer than the following pages.

Title Page

The first page of a document, book, or report, typically displaying the title, author's name, and other pertinent information.

Section 1

Often refers to a primary division in documents, reports, or presentations, setting the foundation for the content that follows.

Gutter Margin

The space added to the side or top margin of a document in preparation for binding.