How is a gain or loss on the earning statement recorded on the - ProProfs Discuss
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How is a gain or loss on the earning statement recorded on the balance sheet?

Asked by C.Bancroft, Last updated: Oct 22, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Please look at the bottom line of the income statement in the text and notice item 45 is$1,286,000. in this case the company has a gain, but the following process also holdstrue for a loss.now see how that number increases retained earnings lower down on the page.youll notice that retained earnings started off the year at $9,936,500 (this would havebeen the previous years balance sheet figure as well). the number increases becauseof the gain in net income of $1,286,000. the retained earnings is now $11,222,500.but the company declares dividends in the amount of $387,000. so retained earningsat year-end is now $10,835,000. retained earnings increased in the last year from$9,936,500 to $10,835,000.this number (item 24 is then transferred to the balance sheet. this is how the gain (orloss) is transferred back onto the balance sheet.if the company in the text had suffered a loss in the year, the retained earningsstatement would have dropped, and the lower retained earnings total would betransferred on to the balance sheet.so all gains and losses for the company find their way on to the balance sheet.
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