answersLogoWhite

0


Best Answer
Answer:Net income is added to equity (retained earnings) at the end of the year. The end of year balance sheet can be presented either before and after profit appropriation. Before profit appropriation

When the balance sheet is made before profit appropriation, net income will be included as a item on the balance sheet in the equity section. In case net income is a loss, this amount will be negative. This is the situation that the question refers to (a loss is shown on the balance sheet).

After profit appropriation

When the balance sheet is made after profit appropriation, net income is not shown as a separate item on the balance sheet under equity. Depending whether or not a dividend is paid, net income will show up as a dividend payable, or will be added to a reserve (for example, retained earnings). In case of a loss, it will be subtracted from a reserve.

User Avatar

Wiki User

14y ago
This answer is:
User Avatar

Add your answer:

Earn +20 pts
Q: Why do companies show a net loss on their balance sheet?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Related questions

Why does companies show net loss in balance sheet?

Same like net profit shown in balance sheet net loss is also shown in balance sheet because net profit or net loss both are part of equity of the owner and to show the net effect of fiscal year;s performance with previous performance it is shown in balance sheet.


How do you show a Net operating loss on balance sheet?

operating loss capitalization


What is the difference between provisional balance sheet and estimated balance sheet?

Provisional balance sheets are used by companies to prepare for financial audits. An estimated balance sheet is used by companies to show projected growth for investors.


Format of balance sheet of manufacturing company as per Schedule VI of Companies Act 1956?

where we can show bank overdraft in balance sheet


Impontance of balance sheet and profit and loss statement?

balance sheet show the financial position of the any business entity from beginning to up to date.


What is the formula for consolidation balance sheet?

There is no simple formula for consolidated balance sheet but in consolidated balance sheet all assets and liabilities of parent and child companies are joint together to show in one financial statement.


Where are surplus shown in balance sheet?

With non-profit organisations, when the balance sheet doesn't show a loss, but what would be classified a profit for profit organisations, it is called a surplus. When it is what would be considered a loss for profit organisations, it is called a deficit.


How do you show negative earning per share in balance sheet of a company?

EPS is not an item to be shown in Balance Sheet. Just evaluate what Balance sheet requires, Assets= Liabilities + Equity. Negative EPS cannot be classified as either Asset Liability or Equity (although Profit or loss are ultimately shown in balance sheet, hence net effect is an increase or decrease in Equity, but EPS itself is not presented in Balance sheet). Then question raise where EPS is shown. It is just a disclosure requirement to show it after calculating the profit & loss account in published accounts.


Is EB-IT shown in balance sheet?

EBIT is not show in balance sheet rather Earning after tax is shown in balance sheet.


How do you consolidate balance sheet?

in consolidated balance sheet all assets and liabilities of parent and subsidiary is shown altogether.


How depreciation influences balance sheet and profit and loss statement?

Profit and loss sheet - show the depreciation for the current year only as an expenseBalance sheet - show the cost price of the asset less any accumulated depreciation from previous years and less the depreciation for the current year.Hope this helps


Which side show loss in balance sheet?

That will be in the equity part. Regardless of whether the company made a profit or loss it is taken to retained earnings where a loss will just reduce retained earnings.