{"id":240602,"date":"2025-05-14T00:53:40","date_gmt":"2025-05-14T00:53:40","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/which-financial-statement-is-prepared-first\/"},"modified":"2025-05-14T00:53:40","modified_gmt":"2025-05-14T00:53:40","slug":"which-financial-statement-is-prepared-first","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=240602","title":{"rendered":"Which Financial Statement Is Prepared First?"},"content":{"rendered":"


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Your business\u2019s financial statements<\/a> give you a snapshot of the financial health of your company. Without them, you wouldn\u2019t be able to monitor your revenue, project your future finances, or keep your business on track for success. So which financial statement is prepared first?<\/p>\n

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Which financial statement is prepared first?<\/h2>\n

These are the four types of financial statements<\/a> in accounting. Use the following chart for a definition of each type of statement, along with the order you prepare them:<\/p>\n

\n\n\n\n\n\n\n\n\n
Financial Statement<\/th>\nDefinition<\/th>\n<\/tr>\n<\/thead>\n
Income Statement<\/td>\nYour income statement<\/a>, also called a profit and loss statement (P&L), reports your business\u2019s profits and losses over a specific period of time.<\/td>\n<\/tr>\n
Statement of Retained Earnings<\/td>\nYour statement of retained earnings<\/a>, or statement of owner\u2019s equity, lists what your business\u2019s retained earnings are at the end of an accounting period.<\/td>\n<\/tr>\n
Cash Flow Statement<\/td>\nYour cash flow statement<\/a>, or statement of cash flows, is all of your business\u2019s incoming and outgoing cash. <\/td>\n<\/tr>\n
Balance Sheet<\/td>\nYour balance sheet<\/a> tracks your financial progress over time and consists of your assets, liability, and equity.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Here\u2019s a closer look at these statements. <\/p>\n

1. Income statement<\/h3>\n

The financial statement prepared first is your income statement.<\/strong> The income statement breaks down all of your company\u2019s revenues and expenses. <\/p>\n

You need your income statement first because it gives you the necessary information to generate other financial statements. <\/p>\n

Use your income statement to see how profitable your business is. The last line of your income statement, called the bottom line<\/a>, shows you net income or loss.<\/p>\n

How to prepare the income statement<\/h4>\n

You can use an income statement to summarize business operations for a certain time frame (e.g., monthly, quarterly, etc.).<\/p>\n

Your income statement begins with sales and ends with net income or loss. Some other parts you might see on your income statement include:<\/p>\n

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