The income statement and balance sheet columns of Reed Company's worksheet reflect the following totals: To enter the net income (or loss) for the period into the above worksheet requires an entry to the
A) income statement debit column and the balance sheet credit column.
B) income statement credit column and the balance sheet debit column.
C) income statement debit column and the income statement credit column.
D) balance sheet debit column and the balance sheet credit column.

Question

The income statement and balance sheet columns of Reed Company's worksheet reflect the following totals:  To enter the net income (or loss) for the period into the above worksheet requires an entry to the
A) income statement debit column and the balance sheet credit column. 
B) income statement credit column and the balance sheet debit column. 
C) income statement debit column and the income statement credit column. 
D) balance sheet debit column and the balance sheet credit column.

Quizplus · Accepted Answer

Net income (or loss) is a component of the income statement, therefore it should be entered in the income statement credit column. Since net income increases retained earnings (if positive), it should also be entered in the balance sheet debit column.

The Income Statement and Balance Sheet Columns of Reed Company's