Question

otal debits must equal total credits. This is the basis of ... a. an income statement. b. an earnings statement. c. a profit and loss statement. d. double-entry bookkeeping.

Answer 1

1 . Correct Answer is Option D. As per double entry bookkeeping system ,  for every debit there should be corresponding credit and vise versa . For example for salary payment salary account is debited and cash or employee account is credited.

2. Option a : Income Statement does not include any concept of , for every debit there must be credit , it primarily focus on income and expenses, gain and loss . It is shows the financial result  of the organisation and its end result is in the form of either net profit or loss.

3. Option b : Earning Statement may be prepared for various purposes for example for company , for employee . If we consider company point of view under this we add net profit or deduct net loss in opening earning and make other adjustment as required in different cases so it does not relate in any way of concept that for very debit there must be corresponding credit.

4. Option c : Profit and Loss account is just like income statement constitute income and expenses , gain and loss and balance is shown either profit or loss. No double entry concept of total of debit equal to total of credit arises.