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How is the income statement linked to the balance sheet?

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The bottom line of the income statement is net income. Net income links to both the balance sheet and cash flow statement. In terms of the balance sheet, net income flows into stockholder's equity via retained earnings.
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Chartered Accountant

The surplus/deficit of the Income & Expenditure Statement adds up to the Capital Account in the Balance Sheet.
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Net profit determined as per income stamen is added to capital in Balance Sheet in case of proprietory concerns and shown as a separate item in Balance Sheet in case of corporate organizations.
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Accounts Teacher

The business runs to earn profit (revenues minus all expenses). This profit is to be repaid to the owners of the business. The net profit (from P&L) gets added to Capital as a liability (Business needs to pay this to the Owner)
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