To determine the net income or net loss using a work sheet, you need to look at the Income Statement columns within the worksheet. These columns will have various debits and credits reflecting the income and expenses of the business.
Here are the steps to summarize this process:
1. Income Statement Columns: Focus on the columns labeled specifically for the Income Statement. These columns typically include all income accounts and expense accounts.
2. Total the Debit Column: Add up all the debit entries within the Income Statement column. Debits typically represent expenses and losses.
3. Total the Credit Column: Add up all the credit entries within the Income Statement column. Credits usually represent revenues and gains.
4. Compare Totals: Subtract the total of the debit column from the total of the credit column:
- If the result is positive (i.e., credits exceed debits), this indicates a net income.
- If the result is negative (i.e., debits exceed credits), this indicates a net loss.
Therefore, the correct statement is:
- The difference between the totals of the debit and credit columns of the Income Statement columns is net income or net loss.
By following these steps, you can accurately determine the financial outcome for the period in question as either a net income or a net loss.
