Please discuss the relationship between the financial statements. What is the order in which the financial statements should be forecasted?
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Sample Answer:(Don’t Copy paste the same)
The order in which future financial statements should be forecasted is future income statements, balance sheets and statement of cash flows. The reason for that order is each statement uses information from the preceeding statement. The income statement is updated first because the net profit or loss impacts retained earnings which is a balance sheet account. The statement of cash flows uses information from both the income statement and balance sheet so it must be prepared last.
Easton, P.D., Wild, J.J., Halsey, R.F, and McAnally, M. L. (2021). Financial Accounting for MBAs (8th ed.). Westmont, IL: Cambridge Business Publishers, LLC , 12-3