Income Statement And Balance Sheet - Article Example

Income ment And Balance Sheet Both the income ment as well as the balance sheet provides answers to two questions together. These financial statement provides insight regarding how well did an organization perform in a particular period or accounting cycle and the assets as well as the liabilities that a particular company owes or has ownership off. Both the financial statement has various elements in common that are exhibited through different headings. The answer to the question that how well a company has performed during a particular accounting cycle is exhibited under the heading of an organization’s net income within the income statement and the heading of retained earnings within the balance sheet of the organization (Ferrell 457).

Furthermore, the amount of goods and services sold by an organization are even clearly exhibited in both the financial statements. The sales revenue figure of the income statement and the amount of cash at hand as well as the accounts receivable heading depict the amount of goods and services sold by an organization. These headings in the income statement as well as the balance sheet help in answering the question of how well a company performed. The answer to the question of what an organization has to pay or what the organization owns in shape of assets is depicted in the income statement’s heading of cost of goods sold and in the balance sheet’s headings of inventory as well as accounts payable.

This is because as the inventory of an organization decreases, the cost of goods sold will increase and increase in cost of goods sold will even be depicted through the accounts payable entry of the balance sheet. Works Cited Ferrell, O.C, Geoffrey A. Hirt, and Linda Ferrell. Business: A Changing World. New York: McGraw-Hill, 2014. Print.