Relationship between the statement of comprehensive income and the statement of financial position

1. The statement of financial position shows the equity of a business at a point in time.
2. The statement of comprehensive income ends with a figure showing net profit for the period. Profit belongs to the owner (or owners) of the business. It is therefore an addition to equity.
3. The statement of comprehensive income links last year’s statement of financial position to that constructed at the end of this year.
4. Links between the statement of comprehensive income and the statement of financial position
   A statement of financial position shows the financial position of a business at a given point in time and is a representation of the accounting equation.
   A statement of comprehensive income shows the profit or loss for a period of time.
   However, there are links between the two financial statements.
   ·          Profit in the statement of comprehensive income affects the statement of financial position, by adding to the owner’s capital.
   ·          Drawings out of profits also affect the statement of financial position, by reducing the owner’s capital.