Which financial statement typically follows the Statement of Retained Earnings?

The Balance Sheet typically follows the Statement of Retained Earnings because it provides a summary of an entity’s assets, liabilities, and equity at a specific point in time. After calculating the retained earnings, which reflects the cumulative profits that have been retained in the business rather than distributed as dividends, the next logical step is to present the overall financial position of the company.

The Balance Sheet uses the retained earnings figure from the Statement of Retained Earnings as part of the equity section. This connection is important, as it demonstrates how the company's profitability affects equity over time. The inclusion of retained earnings in the Balance Sheet helps stakeholders assess the overall financial health and performance of the business.

Other financial statements, while important, serve different purposes and do not follow directly after the Statement of Retained Earnings in the typical order of financial reporting. The Income Statement precedes the Statement of Retained Earnings, as it provides the net income figure that is used to adjust retained earnings. The Statement of Cash Flows reports cash movements and activity but also follows the Balance Sheet. The Statement of Stockholder Equity details changes in equity accounts, including retained earnings, but it is not the next in the sequence after the Statement of Retained Earnings.