The correct answer is: C. 2, 1, 3
Cash at bank is the first item to appear in the preparation of financial statements, followed by gross profit and net profit.
Cash at bank is the most liquid asset of a company and is therefore the first item to be listed on the balance sheet. Gross profit is the difference between the revenue generated by a company and the cost of goods sold. Net profit is the difference between gross profit and all other expenses incurred by a company.
Here is a more detailed explanation of each item:
- Cash at bank is the amount of cash that a company has on hand. This includes cash in the bank, as well as cash in hand. Cash at bank is the most liquid asset of a company, which means that it can be easily converted into cash.
- Gross profit is the difference between the revenue generated by a company and the cost of goods sold. Revenue is the total amount of money that a company receives from selling its products or services. Cost of goods sold is the cost of the goods that a company sells. Gross profit is a measure of the profitability of a company’s sales.
- Net profit is the difference between gross profit and all other expenses incurred by a company. Expenses include things like cost of goods sold, salaries, rent, and utilities. Net profit is a measure of the overall profitability of a company.
The order in which these items appear on the financial statements is important because it provides information about the financial health of the company. Cash at bank is the most liquid asset, so it is listed first. Gross profit is a measure of the profitability of the company’s sales, so it is listed second. Net profit is a measure of the overall profitability of the company, so it is listed last.