Financial statements are prepared in the following order: a. income statement, balance sheet, owners’ equity. b. income statement, statement of owners’ equity, balance sheet. c. statement of owners’ equity, balance sheet, income statement. d. balance sheet, income statement, statement of owners’ equity.

Step 1: Define the Problem

Identify the correct order in which financial statements are prepared.

Step 2: Break Down the Problem

Understand the purpose and sequence of each financial statement:

• Income Statement: Shows the company's revenue and expenses over a period, resulting in net income or loss.
• Statement of Owners' Equity: Reflects changes in the equity section of the balance sheet.
• Balance Sheet: Provides a snapshot of the company's financial position at a specific point in time.

Step 3: Apply Relevant Concepts

The typical order of preparation is:

1. Income Statement: Determines net income, which is needed for the statement of owners' equity.
2. Statement of Owners' Equity: Uses net income to adjust the equity section.
3. Balance Sheet: Uses the updated equity figures to present the financial position.

Step 4: Analysis, Verify and Summarize

Verify the sequence by considering the dependency of each statement on the previous one:

• The income statement's net income is required for the statement of owners' equity.
• The statement of owners' equity provides updated equity figures for the balance sheet.

Final Answer

b. income statement, statement of owners’ equity, balance sheet.