1. What document are financial statements prepared from?
The financial statements should be prepared in the following order:
a) Income statement
b) Statement of retained earnings
c) Balance sheet
2. What does the income statement report?
Income statement reports revenues and expenses and calculates net income or net
loss for the time period.
3. What does the statement of retained earnings show?
Statement of retained earnings show how retained earnings changed during the
period due to net income or net loss and dividends.
