Chapter 5 discussion 2 - income statement and or the...

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Yes, the income statement can be prepared without the balance sheet and the statement of retained earnings, but it would be similar to completing only a part of the puzzle. The income statement is used to summarize the revenue earned during a given period of time with the expenses incurred in generating that related revenue resulting in a net income / loss. By not taking this information forward would give very minimal information about the company and result in non- productive time spent. On the other hand, the balance sheet definitely cannot be prepared with the
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Unformatted text preview: income statement and / or the statement of earnings. Let’s take an example: An increase in revenue is shown on the income statement and the offsetting entry is either an increase in cash or accounts receivable (if billed on account, due in near future) based on double entry rule. This means that any change, increase or decrease on the income statement would definitely change the retained earnings and the balance sheet....
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