list of financial elements within the different categories of a balance sheet Ex

Question

list of financial elements within the different categories of a balance sheet

Explain in 2 or 3 paragraphs which sequence the four major financial statements need to be prepared for, and why

Elements Categories cash Short-term assets Account payable Short-term liabilities Land Long-term assets Property, plant, and equipment Long-term assets Inventory Short-term assets Account receivable Short-term assets Paid in capital Owner’s equity Retained earnings Owner’s equity notes payable Short-term liabilities Mortgage Long term Liabilities

Explanation / Answer

The sequence of financial statements is: income statement, statement of retained earnings, balance sheet and statement of cash flows. Income statement is prepared first as net income from income statement is transferred to retained earnings statement. Retained earnings statement transfers its closing balance to Balance Sheet Finally cash flow statement is prepared to measure a company's financial stability and its ability to pay its creditors

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