Why should the income statement be prepared first?

a. The statement of cash flows should be prepared first because it determines the sources of cash. That information is then used in preparing the income statement.
b. Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.
c. The income statement does not have to be prepared first. Financial statements can be prepared in any order.
d. None of these statements is correct

Ans: b. Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.