The fifth step in preparing the worksheet is to subtotal the income statement columns (e.g., total debits = $30,200 and total credits = $32,800). Because credits exceed debits to income statement accounts, there is a net income of $2,600. The red circles show how the net income is "balanced out" on the income statement columns and "carried forward" to the retained earnings columns (remember, net income increases retained earnings). It is important that the income statement columns be completed with debits equal to credits as shown ($32,800 = $32,800)!