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    carmen2143's Avatar
    carmen2143 Posts: 6, Reputation: 1
    New Member

    Oct 16, 2007, 06:07 AM
    Multiple Step Income Statement
    How can I verify accuracy of income statement?
    kayla1515's Avatar
    kayla1515 Posts: 9, Reputation: 1
    New Member

    Nov 3, 2009, 11:11 PM
    does your assets equal your liabilities+owners equity. It all follows the accounting equasion. Assets=liabilities+oe
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member

    Nov 5, 2009, 04:39 PM
    If you did a worksheet, you can check to see that net income is the same as what was on the worksheet. When you get to the balance sheet, you can make sure it comes out balancing (which is the accounting equation, as kayla1515 stated).

    However, none of that proves that it's totally accurate. For the sake of homework problems, we sometimes have solutions available to check against. In real life, no one ever knows for sure if their financial statements are totally accurate, and there isn't any way to know. There are only ways to catch certain types of mistakes. The balance sheet balancing merely says you worked out all the math correctly, didn't leave anything out, didn't mis-copy something, etc. If it doesn't balance, it's not necessarily because of the income statement either.

    I don't know if you're doing homework or if this is real life. If it's real life, your best bet is checking all balances as best you can prior to doing statements, including balance sheet accounts. For instance, check that cash matches your check register, which has been reconciled with the bank statement; checking that receivables matches an aged report; etc. Many accounts can't be checked against anything (or perhaps only at great cost), so you just have to make sure they seem "reasonable." (e.g. If your main revenue account comes out at zero, obviously you missed something.)

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