The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals: To enter the net income (or loss) for the period into the above worksheet requires an entry to the

Question

The income statement and balance sheet columns of Iron and Wine Company's worksheet reflect the following totals:  To enter the net income (or loss) for the period into the above worksheet requires an entry to the

Quizplus · Accepted Answer

Net income (or loss) is a result of revenue and expenses, which belong to the income statement. The income statement credit column is where revenue and gains are recorded and the income statement debit column is where expenses and losses are recorded. Since net income (or loss) is a result of those accounts, it should also be recorded in the income statement credit (if there's a profit) or debit (if there's a loss) column. On the balance sheet, net income (or loss) is reflected as retained earnings, which is an equity account. Retained earnings increase with net income and decrease with net loss. Therefore, net income (or loss) should be recorded in the balance sheet debit (if there's a loss) or credit (if there's a profit) column. The only option that correctly reflects this is option B.

The Income Statement and Balance Sheet Columns of Iron and Wine