Frequent Asked Questions

This is to denote total amounts that are used in calculations, rather than having many small subtractions or additions.

The order is because the income statement builds on the statement of retained earnings by providing net income from Revenues - Expenses. This is because the statement of retained earnings is comprised of beginning retained earnings, net income, and dividends to find ending retained earnings. The ending retained earnings builds on the balance sheet because this represents the change in company equity after the period/fiscal year is over. It essentially is to add the net income while keeping multiple statements in order to reduce the length of the statement and keep relevant information segregated with other similar information.

These bolded amounts are the final amounts for the key item of the financial statements, the “net income” is the objective of the income statement ; the “ending retained earnings” is the objective of the statement of retained earnings ; the “total assets” and “total liabilities and stockholders’ equity” are the objectives of the balance sheet (to make sure the amounts balance). These are the only amounts that should be bolded, this is to make them distinguishable from the underlined amounts in each document.