Which financial statement is typically prepared first in the financial statement preparation process?

The Income Statement is typically prepared first in the financial statement preparation process because it provides a summary of the company's revenues and expenses over a specific period, ultimately resulting in net income or loss. This net income figure is crucial as it serves as a starting point for preparing other financial statements.

After calculating net income, this figure is then used in the Statement of Changes in Equity, which reflects the changes in equity accounts during the period, including retained earnings affected by the net income. Following the preparation of these statements, the Balance Sheet can be created to provide a snapshot of assets, liabilities, and equity at a specific point in time. Finally, the Statement of Cash Flows, which outlines cash inflows and outflows, can be prepared using information from the Income Statement along with other data.

Thus, the logical flow begins with the Income Statement, making it the first financial statement that is prepared.