when preparing the financial statements, why is the income statement prepared first? a. the income statement…

when preparing the financial statements, why is the income statement prepared first? a. the income statement is used to prepare the balance sheet. b. the income statement is the most important statement to investors and creditors. c. net income or net loss from the income statement is used for the statement of retained earnings. d. the income statement is the easiest statement to prepare.

when preparing the financial statements, why is the income statement prepared first? a. the income statement is used to prepare the balance sheet. b. the income statement is the most important statement to investors and creditors. c. net income or net loss from the income statement is used for the statement of retained earnings. d. the income statement is the easiest statement to prepare.

Answer

Brief Explanations:

The income statement is prepared first because the net income or net loss from it is a key component for the statement of retained earnings. The statement of retained earnings then feeds into the balance sheet. Option A is incorrect as the income statement directly relates to retained earnings statement first, not the balance sheet. Option B is wrong as importance to investors/creditors isn't the reason for preparation order. Option D is incorrect as ease of preparation isn't the valid accounting - based reason.

Answer:

C. Net income or net loss from the income statement is used for the statement of retained earnings.