How is the Balance Sheet linked to the other financial statements?
A)The amount of retained earnings is reported on the Balance Sheet as a liability.
B)Retained earnings is added to total assets and reported on the Balance Sheet.
C)Retained earnings is reported on the Balance Sheet.
D)There is no link between the Balance Sheet and other statements, as each contains different accounts and provides different information.

Question

Quizplus · Accepted Answer

Retained earnings, which reflect the cumulative amount of net income minus dividends paid to shareholders over time, are reported in the equity section of the Balance Sheet. This figure is directly affected by the net income or loss reported in the Income Statement, as net income increases retained earnings and a net loss decreases it. Thus, the Balance Sheet is linked to the Income Statement through retained earnings.

How Is the Balance Sheet Linked to the Other Financial