Which of the following is a true statement?
A)Under the articulation approach, all accounting transactions are reported on the income statement.
B)Because income is a subclassification of retained earnings, the income statement and balance sheet articulate.
C)Under articulation, adjustments to the income of prior years are reflected on the current year income statement.
D)All transactions can be easily categorized using the current accounting classification system.

Question

Quizplus · Accepted Answer

This statement is true. The income statement reports a company's revenues and expenses for a specific period, which ultimately results in the net income (or net loss) for that period. Net income is then added to retained earnings on the balance sheet, which is a cumulative record of a company's financial transactions over time. Therefore, income is a subclassification of retained earnings, and the income statement and balance sheet must articulate.

Which of the Following Is a True Statement