The Accounting Worksheet, Page 16

Partial Worksheet with Net Income

Here are the steps involved in creating a worksheet for net income: 

1. Skip a line after the last account, and enter the words Net Income in the Account Name column (A). 
2. On the same line, enter the net income amount in the debit column of the income statement (B). 
3. On the same line, enter the net income amount listed in the balance sheet credit column (C). 
4. In the six-column worksheet: 

• The net income is shown on the credit side of the balance sheet section. 
• The revenue, expenses, and withdrawals (which are temporary accounts) will affect the owner’s equity accounts in the following way: 
  
  
  •  Revenue increases the capital 
  • Expenses decrease the capital 
• The effects of Net Income or Net Loss on Capital are:  
  
  
  • Revenue > Expenses = Net Income => Capital Increases. 
  • Revenues < Expenses = Net Loss => Capital Decreases.