Which of the Following Correctly Identifies One of the Links

question 33

Multiple Choice

Which of the following correctly identifies one of the links among the four financial statements?

• A)Net income from the income statement goes directly to the balance sheet.
• B)Net income from the income statement goes to the statement of changes in equity.
• C)Other comprehensive income goes to the statement of cash flows.
• D)Retained earnings from the balance sheet goes to the income statement.

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Definitions:

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Closing Entry

An accounting action that transfers the balances from temporary accounts to permanent ones at the end of an accounting period.

Owner's Equity

The residual interest in the assets of an enterprise after deducting its liabilities; represents the owner's claims against the company's assets.

Income Summary

An account to which the revenues and expenses are transferred in order to calculate the net income for the period, ultimately transferring to retained earnings.