Let's say a company has a net income of 100K for the quarter. That will get added to retained earnings on a balance sheet, but then how does the B/S get balanced?
| +182 | UBS Accused of Favoring H-1B Workers While Cutting U.S.-Born Employees | 44 | 1h |
| +77 | IB Energy Drink Tier List / Ranking | 52 | 1h |
| +70 | PJT M&A Group Selection 2026 | 13 | 5h |
| +36 | Quick Thoughts on CVC AI Sale Process | 7 | 3d |
| +33 | Feedback for internship first desk at IBD BB - personal fit, "don't be too confident" | 23 | 20h |
| +27 | Does BofA still pay its associates rat pellets? | 11 | 3h |
| +24 | ONLY THESE BANKS OR YOU STRUCK OUT | 6 | 7m |
| +19 | Updated JPM Group Rankings | 28 | 2h |
| +18 | What happened to Greenhill | 8 | 3d |
| +18 | VP Deal Origination Credit | 2 | 4h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Flows through to retained earnings as you pointed out. On the asset side will flow through via cash generally (net income has to be received by you in some way). May also come through as another asset e.g. accrued revenue. Assets go up and equity goes up, where retained earnings is housed.
got it. So if net income is 100K, I can add 100K to cash and add 100K to retained earnings? is that how this works?
Would probably advise you to go through the 400IBD document.
Essentially, the way it's typically done is from your income statement -> CFS -> Balance sheet. That being said, the 100k net income will flow through the CFS, taking into account operating, investing and financing activities. Assuming the numbers on these are 0 (which is impossible), this leads to your cash increasing by 100k too.
So, to answer your question, Dr Cash, Cr Retained Earnings by 100k. So both an asset and equity increase by 100k, allowing your balance sheet to balance.
Bad assumption to put it all in cash. Receivables (A/R, Interest Receivable, etc) will usually accumulate some of the Net Income
Bad assumption to put it all in cash. Receivables (A/R, Interest Receivable, etc) will usually accumulate some of the Net Income
Yup agree that it should never be all into cash - which is why I mentioned that it goes through the CFS for changes to working cap, non-cash, capex etc. Stated assumption as 0 to CFS items for simplicity sake to answer the main question. Would recommend OP to look through some financial modelling course to get a more detailed answer.
Quod qui nesciunt reiciendis et sunt. Aspernatur omnis doloremque voluptatem sunt tempora vel nulla. Ut laudantium accusantium molestiae expedita est enim eaque.
Repudiandae nesciunt aliquid reiciendis vero. Optio distinctio libero officia ut. Voluptatem dignissimos saepe est doloremque. Impedit eaque vero rerum reiciendis facere. Laudantium odio ipsa dolores optio eum molestias. Et ad ut aperiam repellat totam sed eveniet.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...