Requirement 2. Explain how to prepare each statement. Begin by selecting the items listed that pertain to preparing the income statement. (Complete all input fields.) Preparing the Income Statement Each asset account is listed separately and then totaled. Cash is always listed first. Each dollar amount is calculated by evaluating the cash column on the transaction detail. Each expense account is listed separately from largest to smallest and then subtotaled if necessary. Financing activities include cash from the issuance of common stock and payment of cash dividends. Investing activities include the purchase and sale of land and equipment. Liabilities are listed separately and then totaled. Liabilities that are to be paid first are listed first. Net income is calculated as total revenues minus total expenses. Operating activities involve cash receipts for services provided and cash payments for expenses paid. The beginning retained earnings is listed first and will always be the ending retained earnings from the previous time period. The dividends are subtracted from retained earnings. If there had been a net loss, this would also be subtracted. The ending cash balance must match the cash balance on the balance sheet. Activate Windows Go to Settings to activate Win The header includes the name of the business, the title of the statement, and the date, listed as a period of time.