Practice question · True or false
Net profit flows into retained earnings on the balance sheet at period-end.
Hints
- The closing process moves the result into a permanent account.
- That transfer is the bridge between the two statements.
Show the answer
True
Why
The closing entry sweeps net profit into retained earnings, the permanent bridge between the two statements. This is why the balance sheet always reflects cumulative lifetime profit.
Practise The Income Statement
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