LINKING THE INCOME STATEMENT
AND BALANCE SHEET

Topic: A look at the Balance Sheet and Income Statement and how they interrelate.

Concept: To introduce students to the two financial statements that are reflected in the Accounting Equation and how these two statements are linked and related.

Objectives

• Students will understand what an income statement is and which accounts can be found on an income statement
• Students will learn the basic format of an income statement
• Students will understand what a balance sheet is and will identify which accounts can be found on a balance sheet
• Students will learn the basic format of a balance sheet
• Students will be introduced to the relationship between the balance sheet and the income statement

Suggested Grades:

Seventh Grade - Eighth Grade - Ninth Grade - Tenth Grade - Eleventh Grade - Twelfth Grade - Adult Education

INCOME STATEMENT AND BALANCE SHEET LESSON PLAN

Teaching Materials

• Lesson - Linking the Income Statement and Balance Sheet (see below for printable lesson)
• Linking the Income Statement and Balance Sheet
• Copies of an Annual Report from a well-known company.

Lesson Activity

Understanding the balance sheet and its relationship with the income statement is an important concept in accounting. This lesson introduces the relationship and is a precursor to the next two lessons which look at each statement and associated accounts in more detail

1. Have students look at the Financial Statements prepared in the annual report.

2. Discuss the various income statement Accounts

• Look at the types of revenues.
• Discuss the various expenses.
• Discuss net income and explain how it is calculated.
  

3. Discuss the various balance sheet account entries

• Look at each section (assets, liabilities, equity) in detail.
• Briefly discuss the entries and explain concepts such as depreciation, accrued liabilities, and retained earnings.

4. Have students identify the common link between the balance sheet and the income statement: earnings

5. Discuss where earnings are shown on the balance sheet and what earnings represent: an increase in the equity of the company.

Assessment/Evaluation

Have students complete worksheet. A suggested passing grade is 70% or greater.

Print out the teaching lesson pages and exercise worksheets for use with this lesson:

LINKING THE INCOME STATEMENT AND BALANCE SHEET LESSON

This is a lesson on the purpose of the Income Statement, the Balance Sheet, and how they can be used together.

Student worksheet based on the above lesson.

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Income Statement vs. the Balance Sheet Lesson Plan - Simple Basic rules professional template guide etiquette lesson - High School Student - Secondary education - Adults - Teens - Teenagers - Instruct Theme Unit - Secondary Education - Middle School - Young Adults - Classroom Review - Career Accounting Education