Income Statement

The income statement is prepared first because it provides the net income figure needed for the statement of retained earnings. It summarizes the business's operating results by matching revenue earned during a specific period with the expenses incurred to generate that revenue. Essentially, it shows how much profit the business made over the accounting period. The titles for this statement may vary, but "income statement" is the most commonly used term​​​.

Statement of Retained Earnings

After preparing the income statement, the net income is used in the statement of retained earnings, which shows how much of the company’s earnings are retained after dividends are paid to shareholders. This statement reflects any increases or decreases in retained earnings over the period. Increases typically come from net income, and decreases result from dividends declared or net losses​​.

Balance Sheet

The balance sheet reveals the financial position of a company at a specific point in time. It lists the company’s assets, liabilities, and owners' equity. The ending retained earnings figure from the statement of retained earnings is reported here as part of the owners' equity section. The balance sheet is prepared last because it uses information from both the income statement and the statement of retained earnings​.