List the order in which the balance sheet, statement of reta

List the order in which the balance sheet, statement of retained earnings, and income statement are prepared. Briefly discuss why this order is necessary.

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ANSWER

The order in which these statements are prepared is income statement, statement of retained earnings, and balance sheet. The income statement is prepared first because net income is needed for the statement of retained earnings. The balance sheet is prepared last because this statement needs the ending balance of retained earnings.