The Correct Data Flow from One Financial Statement to the Next

question 62

Multiple Choice

The correct data flow from one financial statement to the next is:

• A) statement of retained earnings, income statement, balance sheet, statement of cash flows.
• B) balance sheet, statement of retained earnings, income statement, statement of cash flows.
• C) statement of retained earnings, income statement, statement of cash flows, balance sheet.
• D) income statement, statement of retained earnings, balance sheet, statement of cash flows.

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Definitions:

Net Income

The net profit of a company calculated after expenses and tax deductions from its total revenue.

Net Loss

The amount by which total expenses exceed total revenues in a company, indicating a financial loss.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred.

Income Summary

An account used in the closing process that summarizes the revenues and expenses for a specific accounting period before transferring the net income to retained earnings.