Question

Which of the following statements about the income statement and balance sheet accounts is correct?

		Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.
		The balance sheet reports financial activities only for the current accounting period.
		The income statement reports the financial position of a company at a point in time.
		The income statement reports the cash received and paid during the period.

Answer 1

The Option A is Correct: Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

Statement of Income Statement shows the balances in the Nominal Accounts which is closed at the year end and transferred to the Retained Earnings after the close of the period.

Balance sheet accounts show the Year to date balances of the accounts and all the balances are accumulated and are as at the reporting date.

Heading of the Balance sheet: Balance sheet as on ----

Heading of Income Statement: Income Statement for the Period ----- to -----

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