Which Financial Statement is Prepared First, Second, Third And Why

We already studied about Order of Financial Statements in our previous article, but, here we will study about which Financial Statement is prepared at first place. The Financial Statement that should be prepared at first is Income Statement as all the Temporary Accounts (Revenues And Expenses) are transferred from Adjusted Trail Balance to Income Statement to find out financial performance (Net Income) during the accounting period that is transferred to Statement of Retained Earnings.

Which Financial Statement is Prepared Second And Why

The Financial Statement which is prepared at Second is the Statement of Retained Earnings or Statement of Changes In Equity because it is prepared to find out retained earnings after giving Dividends to shareholders and closing balance of retained earnings is reported on balance sheet or Statement of Financial Position.

Which Financial Statement is Prepared Third And Why

Balance Sheet is the statement which is prepared at the third place as all the Balances of Permanent Accounts are transferred to it that will continue in the next accounting period unless the business is closed down.