Answer & Explanation
B) Income statement - Statement of retained earnings - Balance sheet
The financial statements should be prepared in the following order:
Income statement - Statement of retained earnings - Balance sheet
1. Income statement reports revenues and expenses and calculates net income or net loss for the time period.
2. Statement of retained earnings show how retained earnings changed during the period due to net income or net loss and dividends.
3. Balance sheet reports assets, liabilities, and stockholders’ equity as of the last day of the period.