How is the income statement linked to the balance sheet?


1 Answer(s)


The income statement reports a company's financial performance while the balance sheet reports its financial health. One proceeds from the other. A company's financial performance regulates its financial health. Performance and health are linked through the net income account on the income statement and the equity account on the balance sheet. Consequently, your understanding of the interrelationship between the two is essential for having a fully informed perspective of your company's financial picture.