Final answer:
Income accounts are added in the Chart of Accounts in QuickBooks Online, which records all transactions in the company's general ledger. This setup allows income to be reflected in the Profit and Loss Statement, while the Balance Sheet reflects the company's financial status at a certain time, and all entries start in the General Journal using debits and credits.
Step-by-step explanation:
In QuickBooks Online, income accounts should be added in the Chart of Accounts. The Chart of Accounts is a complete list of each account in a business's financial statements, used to record transactions in the company's general ledger. Income accounts represent the various sources of income a company earns and are fundamental to its bookkeeping and accounting system. When a transaction is recorded, for example, receiving payment for services provided, it is entered into the accounts that are part of the Chart of Accounts, and this reflects on reports like the Profit and Loss Statement (also known as an Income Statement).
The Profit and Loss Statement, on the other hand, is a financial report that displays the income, expenses, and profits over a specific period, but it is not used for adding new accounts. It is generated based on the data entered into the Chart of Accounts. Similarly, the Balance Sheet is a financial snapshot at a certain point in time, showing the company's assets, liabilities, and equity, also fed by the general ledger. Meanwhile, the General Journal is where the initial entries of all transactions are recorded using debits and credits, after which they are posted to the appropriate accounts.