When a company has earned a net income, the net income amount is entered on the work sheet on the
A) credit side of both the Income Statement and the Balance Sheet columns.
B) credit side of the Income Statement columns and the debit side of the Balance Sheet columns.
C) debit side of the Income Statement columns and the credit side of the Balance Sheet columns.
D) debit side of both the Income Statement and the Balance Sheet columns.

Question

Quizplus · Accepted Answer

A company's net income represents the excess of revenue over expenses, which increases the company's equity. Since the Income Statement column starts with revenue and subtracts expenses to calculate net income, net income is entered on the debit side of the Income Statement columns. On the other hand, the Balance Sheet column shows the assets, liabilities and equity accounts, and net income affects the equity accounts. Therefore, net income is entered on the credit side of the Balance Sheet columns. The correct option that matches this description is option C, debit side of the Income Statement columns and credit side of the Balance Sheet columns.

When a Company Has Earned a Net Income, the Net