How would revenue, which affects the earnings statement, ultimately - ProProfs Discuss
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How would revenue, which affects the earnings statement, ultimately be recorded on the balance sheet?

Asked by Milt, Last updated: Nov 03, 2020

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Revenue is recorded on the income statement. At the end of the fiscal year, the net income from the income statement adds to retained earnings, and the new retained earnings figure is entered on the balance sheet. this allows the balance sheet to balance even though some transactions affected the earnings statement through the course of the year. For example: if you earned $100 in cash and had no other assets or liabilities, your double entry system would show an increase in cash by $100 and an increase in revenue by $100. At year-end, assuming your net income is $100 and you had no retained earnings from the previous year, your retained earnings would now be $100. The retained earnings would appear in the owners equity section of the balance sheet. As such, the total assets ($100 in cash account) would equal the total liabilities and owners equity ($100 in retained earnings).

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