Hey all. Got a simple question but I wasn’t sure of the answer to. It has to do with the relationship between income statement and balance sheet. We all know that Equity end = Equity beg + NI - Div + contributed capital. So if NI changes, then it will affect equity, so in turn we can say it will affect the balance sheet?? But due to chain reaction, if equity changes, then in order for the balance sheet to balance, then either asset or liability has to change too?
I am asking this question because I remember sometimes in class, the instructor would say something like oh this won’t affect the BS, but then it got me thinking: what if it affects the income statement? which then led me to this question.
Many thanks! And good luck studying on the last day!