Finance Whiz Quiz - Bonus Answer

The challenge, of course, is sorting out the Equity section. To do this, you need to understand the structure of the Balance Sheet, and how the two statements relate to each other.

Totaling Assets, Liabilities, Revenue and Expense should be a breeze. Since Assets = Liabilities + Equity, once you've calculated Assets you know what goes on the last line of the Balance Sheet. Now you can subtract Total Liabilities from it to find Total Equity. The Surplus or Deficit line on the Income Statement is the difference between Revenues and Expenses. The Current Earnings amount in the Equity section equals the year's Surplus or Deficit to date. Now you can subtract this amount from Total Equity to find the company's Retained Earnings.