1.) Lets say I have
Assets = 100 Liabilities = 50 Share holders equity = 50.
Assets = Liabilities + Shareholders equity satisfies.
Now at the end of the year say I have net Income of 20.
My shareholders equity will become 70.
Due to this the equation Assets = Liabilities + Shareholders equity does not satisfy.
100 = 120.
This equation can be only satisfied if my assets increase by 20 or my liabilities decrease by 20. So what will happen in this case?
2.) Why we put interest expense on Income Statement and not on Balance sheet?
3.) What other account will be credited if I increase my shareholder's equity?