QUESTION

ANSWER

$[$LO $4]$ Why is the income statement the first financial report prepared?

There is no required order for preparing financial statements. The income statement can be completed at any point in the financial reporting process.

The income statement is prepared first because accounts included on the income statement are all temporary accounts that must be closed before preparing the remaining financial statements.

The income statement is prepared first because its result, Net Income, is needed as part of the other financial statements.

The income statement is prepared first because its result, Net Income, is the most important financial measurement used by decision makers.

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