Among the financial statements, the balance sheet is typically prepared last. The reason for this is that the balance sheet summarizes the company’s financial position at a particular point in time and relies on data from the income statement and the statement of owner’s equity, which are prepared first.
The sequence generally follows these steps: first, the income statement is prepared to calculate the net income or loss for the period. This figure is then used in the statement of owner’s equity, which reflects changes in equity for that period. Finally, the balance sheet incorporates these financial results to provide an overview of assets, liabilities, and equity.
Hence, the order of preparation is crucial, and while technically, financial statements can be prepared in any order, following the traditional sequence is important for accurate and cohesive reporting.