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 added to the retained earnings section of the balance sheet because it represents the portion of the company's profits that are not paid out as dividends. Option A is incorrect because net income is not entered into the balance sheet but rather used to calculate retained earnings. Option C is incorrect because assets and liabilities must always balance, but it does not represent a linkage between the financial statements. Option D is incorrect because cash is not the same as total expenses on the income statement, as expenses include non-cash items such as depreciation.

A Linkage Between the Financial Statements Includes Which of the Following