The income statements of the prior and current year are linked via the balance sheet.

Question

Quizplus · Accepted Answer

The income statement and the balance sheet are related but not directly linked in a sequential manner from one year to the next. The income statement reports a company's financial performance over a specific period, showing revenue, expenses, and net income. The balance sheet, on the other hand, is a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and equity. While the net income from the income statement affects the equity section of the balance sheet, the income statements of the prior and current year are not linked through the balance sheet. Instead, each year's income statement stands on its own, reporting the financial performance for that year.

The Income Statements of the Prior and Current Year Are