A linkage between the financial statements includes which of the following?
A)net income from the balance sheet is entered into the income statement
B)net income from the income statement is entered into the retained earnings in the balance sheet
C)assets have to equal liabilities
D)cash is the total expenses on the income report

Question

Quizplus · Accepted Answer

Net income from the income statement is carried forward to the retained earnings section of the balance sheet, since it represents the amount of earnings that have been kept within the business over time. This allows for the calculation of the total equity of the business. A is incorrect because net income is transferred from the income statement to the retained earnings section of the balance sheet, not the other way around. C is incorrect because while assets and liabilities must be equal in balance, this is not necessarily a linkage between the financial statements. D is incorrect because cash is not the total expenses on the income statement, but rather the amount of liquid funds on hand at a given time.

A Linkage Between the Financial Statements Includes Which of the Following