The balance sheet should be prepared a. after the income statement and the statement of owner's equity b. before the income statement and the statement of owner's equity c. before the income statement and after the statement of owner's equity d. after the income statement and before the statement of owner's equity

Question

Hood

Business

24 August, 17:14

The balance sheet should be prepared a. after the income statement and the statement of owner's equity b. before the income statement and the statement of owner's equity c. before the income statement and after the statement of owner's equity d. after the income statement and before the statement of owner's equity

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Answers (1)

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Freddie · Answer 1

The answer is D.

Explanation:

The balance should always be prepared after income statement (profit or loss and other comprehensive income statement) because profit for the year (net income) is a line item under balance sheet. It is under equity in balance sheet and it must be known for balance sheet to be prepared.

It is prepared before statement of owner's equity because it tells us how the equity, retained earnings in the balance has changed during the period or between current and prior year.