Canada Net income added to common shareholders equity

[BA BARACUS]

Why is NI added to the shareholders equity. Is net income not part of the company's revenue?

 

[smartthought]

Net income is the profit that add onto the equity of the shareholders eventually. Hope that makes sense.

 

[smallbushelp]

Yes, net income, in a sense, is part of a company's revenue because it is the revenue that is left over at the end of the year after all expenses have been subtracted. But the next year, you have to start your revenue and expense tracking all over again, so the net income from the previous year is added to retained earnings (which is an equity account). That way, the company can keep the current year's NI separate from prior year's NI.