Final answer:
The statement of owner's equity depends on the income statement as it reflects changes in the owner's investment in the company due to net income or loss, additional investments, and withdrawals or distributions.
Step-by-step explanation:
In a market economy, a company's income statement shows the revenues and expenses of the business over a given period. The statement of owner's equity, on the other hand, reflects changes in the owner's investment in the company due to net income or loss, additional investments, and withdrawals or distributions.
The income statement contributes to the statement of owner's equity by providing the net income or loss figure, which is then used to calculate the change in the owner's equity. If the company generates a net income, the owner's equity will increase. Conversely, if the company incurs a net loss, the owner's equity will decrease. Therefore, the statement of owner's equity depends on the income statement.