The fees earned account primarily flows into the income statement. This account represents the revenue generated from services provided or products sold, and it is a crucial component of a company’s financial performance.
When a company earns fees, it records this income in the income statement, which summarizes revenues and expenses over a specific period. The total fees earned contribute to the net income or loss for that period. This net income is then carried over to the statement of owner’s equity.
The statement of owner’s equity shows how the owner’s equity has changed over time, incorporating net income from the income statement as well as any additional investments or withdrawals made by the owner. However, it’s important to note that the fees earned account does not directly affect the balance sheet. Instead, the impact is seen on the owner’s equity section when net income is added to the retained earnings.
In summary, while fees earned are recorded in the income statement, the effects of those earnings eventually appear in the statement of owner’s equity through retained earnings, but they do not directly flow into the balance sheet as a separate item.