#cfa-level-1 #reading-23-financial-reporting-mechanics
Balance sheet and Income statements are linked together through the retained earnings component of owners’ equity.
Beginning retained earnings is the balance in this account at the beginning of the accounting period, and ending retained earnings is the balance at the end of the period.
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3.2. Accounting Equationsxpense 50 Owners’ equity 1,500 Net income 200 2,000
The balance sheet represents a company’s financial position at a point in time, and the income statement represents a company’s activity over a period of time. <span>The two statements are linked together through the retained earnings component of owners’ equity. Beginning retained earnings is the balance in this account at the beginning of the accounting period, and ending retained earnings is the balance at the end of the period. A company’s ending retained earnings is composed of the beginning balance (if any), plus net income, less any distributions to owners (dividends). Accordingly, the equation underlying r Summary
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