Accounting Question And Answers - Income Statement & Equity
Question: Lets say that in 2009 a company had 10,000 equity listed on the balance sheet. In 2010 they had 15,000.
By looking at the income statement and statement of comprehensive income, could i figure out why there is a difference of 5,000 in 2010?
Answer: It is not always possible to explain the difference in equity, i.e. increase from last year, only by using Income Statement, since Income Statement shows only Net Income, however it does not show other changes in equity, like distribution of dividends, increase in stock capital and other items.
The changes to be seen in the statement of retained earnings and stockholders' equity.
Therefore if in the balance sheet we have increase in total equity since last year amounting to $5,000, to understand it, you will need income statement and statement of retained earnings and stockholders' equity.
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