Linking the Income and Balance Sheet

Generally, a balance sheet and an income statement are prepared and issued together because in a way they are twin reports, the income statement showing what happened over a period of time and the balance sheet showing the resulting condition at the end of that period.

Since these statements are usually studied in relation to one another, it is highly desirable for them to tie together with one common figure. You will see that the Net Profit/Loss on the bottom of the income statement discussed earlier was $4,550.00. If you look at the Equity section of the balance sheet shown earlier, you will notice that the $4,550.00 Profit/Loss lists as a part of the total equity. This ties the income statement to the balance sheet report.