Arrange Financial Statements in Correct Sequence-

(A) Cash Flow Statement

(B) Balance Sheet

(C) Profit and Loss A/c

(D) Trading Account

Choose the correct answer from the options given below:

The financial statements must be prepared in a specific logical sequence because each statement depends on information from the previous one.

Trading Account is prepared first. It calculates Gross Profit by comparing Net Sales with Cost of Goods Sold.

The Gross Profit (or Gross Loss) from Trading Account is then transferred to Profit and Loss Account. This account adds other incomes and deducts all operating expenses to arrive at Net Profit or Net Loss.

Balance Sheet is prepared next. The Net Profit calculated in Profit and Loss Account is added to the capital (in case of proprietorship/partnership) or retained earnings (in case of companies). This updated capital/equity figure appears in the Balance Sheet, which shows the financial position on a particular date.

Cash Flow Statement is prepared last. It requires comparative Balance Sheets of two periods and the current year's Profit and Loss Account to classify cash flows into operating, investing, and financing activities.

The logical flow: Trading A/c finds Gross Profit → P&L A/c finds Net Profit → Balance Sheet shows updated financial position → Cash Flow Statement analyzes cash movements.

Therefore, the correct sequence is (D), (C), (B), (A).

Correct Option: 3