What is the first statement to complete in the financial reporting process?

The first statement to complete in the financial reporting process is the Income Statement. This statement captures the company's revenues and expenses over a specific period, ultimately revealing the net income or loss. The Income Statement is essential because it provides a clear picture of the company's operational performance, highlighting how well it generates profit from its core business activities.

Completing the Income Statement first sets the stage for the other financial statements. For example, the net income calculated on the Income Statement is crucial for the Retained Earnings Statement, since it flows into this statement and affects the equity section of the Balance Sheet. Without understanding the profit or loss for the period, it would be challenging to accurately prepare the other financial statements.

The Balance Sheet, Statement of Cash Flows, and Retained Earnings Statement all rely on the information derived from the Income Statement, which is why it is typically the first report prepared in the financial reporting process.