Business – 10.1 Financial statements – Statement of financial position | e-Consult
10.1 Financial statements – Statement of financial position (1 questions)
Login to see all questions.
Click on a question to view the answer
Revenue increases the company’s earnings for the period. When revenue is earned, it is usually recorded as a receivable (if not yet received) or as cash, so current assets rise. After all expenses are deducted, the profit is transferred to retained earnings, which is a component of shareholders’ equity. Therefore, higher revenue leads to higher current assets (cash or trade receivables) and, after profit is realised, a higher retained‑earnings balance, increasing total equity.