What is the second financial statement in the traditional order of financial statements?

The second financial statement in the traditional order is the Income Statement. In the standard set of financial statements, the sequence typically begins with the Income Statement, followed by the Statement of Retained Earnings, the Balance Sheet, and concluding with the Statement of Cash Flows.

The Income Statement is crucial because it provides detailed information about a company’s revenues and expenses during a specific period, allowing stakeholders to assess the company's profitability. Following the Income Statement, the Statement of Retained Earnings shows how profits are retained in the business, connecting the net income figure from the Income Statement to the equity section of the Balance Sheet.

Understanding this sequence is essential as it reflects how the results of operations influence retained earnings and ultimately the financial position of a company.