Four Financial Statements Are Usually Prepared for a Business

question 76

Multiple Choice

Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of stockholders' equity (SSE) , the balance sheet (B) , and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

• A) I, SSE, B
• B) B, I, SSE
• C) SSE, I, B
• D) B, SSE, I

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Definitions:

Amortization Expense

The gradual write-off of the cost of an intangible asset over its useful life.

Equity-Method

An accounting technique used to record investments in affiliate companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee's profits or losses.

Operating Activities

Activities that relate directly to the operation of a business, including sales revenue and expenses, reflected in the cash flow statement.

Decrease in Inventory

A reduction in the amount of goods available for sale or use, often reflected in financial statements and can indicate sales performance or a strategy to lower inventory levels.