Financial statements for the one-month period ended January 31, 2015 can now be prepared from the trial balance figures.
The asset and liability accounts from the trial balance and the ending balances for share capital and retained earnings on the statement of changes in equity are used to prepare the balance sheet.
Note the links between financial statements:
The income statement is linked to the statement of changes in equity.Revenues and expenses are reported on the income statement to show the details of net income. Because net income causes shareholders’ equity to change, it is then reported on the statement of changes in equity.
The statement of changes in equity is linked to the balance sheet. The statement of changes in equity shows the details of how shareholders’ equity changed during the accounting period. The balances for share capital and retained earnings that appear on the statement of changes in equity are transferred to the shareholders’ equity section of the balance sheet.
The balance sheet summarizes shareholders’ equity. It shows only account balances for share capital and retained earnings. To obtain the details regarding these shareholders’ equity accounts, we must look at the income statement and the statement of changes in equity.
- 1893 reads
