[mahoni002]

What is the relationship between Blance sheet and income Statement?

[morgaine300]

You have five kinds of accounts:

Assets
Liabilities
Equity
Revenue
Expense

The first three are your equation and also your balance sheet. Revenues and expenses actually belong in equity, but during an accounting period we keep them all separated out so we know what is going on in our company. We then summarize the revenues and expenses in the income statement. The net income then carries over into the equity and "updates" it. Once it's updated, you can proceed with the balance sheet. So that connection is in the equity.