2
Question
The correct sequence in preparation of periodical financial statement would be :
1. Preparation of balance sheet
2. Preparation of cash flow statement
3. Preparation of trial balance
4. Preparation of Profit and Loss A/c
Select the correct answer from the option given below.
The correct sequence in preparation of periodical financial statement would be :
1. Preparation of balance sheet
2. Preparation of cash flow statement
3. Preparation of trial balance
4. Preparation of Profit and Loss A/c
Select the correct answer from the option given below.
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Solution
The correct option is B 3,4,1,2
There is an order of preparing financial statements because they build on one another. The first step in the process is the trial balance. The Trial Balance is the balance of all the accounts at the end of the accounting period. After Trial Balance next statement prepared is Profit and Loss A/c. It is the statement that lists all the revenues and expenses for the business for a specific period. After that Balance Sheet is prepared, it lists all the assets and liabilities of the business. Next statement is Cash Flow Statement. It shows inflows and outflows of cash.
There is an order of preparing financial statements because they build on one another. The first step in the process is the trial balance. The Trial Balance is the balance of all the accounts at the end of the accounting period. After Trial Balance next statement prepared is Profit and Loss A/c. It is the statement that lists all the revenues and expenses for the business for a specific period. After that Balance Sheet is prepared, it lists all the assets and liabilities of the business. Next statement is Cash Flow Statement. It shows inflows and outflows of cash.
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