Income Statement part 1
What is the goal of every business?
To make MONEYYYY (Profit).
What is the drawings account?
A record of all withdrawals of assets by the owner.
Define the Time Period Principle.
A pre-established time period that all businesses record their financial results or transactions.
What does the Owner's Equity section of the Balance sheet show?
The owner's claim on the business assets.
Any entity (individual or group) that owes your business money.
A Debtor.
How do you differentiate net loss and net income?
REVENUE is greater than expenses there is a NET INCOME.(positive)
EXPENSES are greater than revenue there is a NET LOSS. (negative)
Debits and Credits for income statement accounts are determined by _____________________?
How they effect owner's equity.
States that ________ is counted even if the balance isn't fully paid as of yet.
Revenue Recognition Principle.
What decreases the Capital?
Drawings AND/OR Net Loss.
What does GAAP stand for and give an example.
Generally Accepted Accounting Principles. Ex.) Time period principle, Matching principle, Revenue Recognition principle.
Define a fiscal period.
The period of time over which a business measures/records their revenues and expenses.
How does reveune and expenses effect owner's equity?
Revenue = increases owners equity, therefore it goes on the credit side
Expenses = decreases owners equity, therefore it goes on the debit side
What basis of accounting do we use?
Accrual Basis of Accounting.
On a T Account, how would you record losses?
You would record it on the debit side.
In which financial statement will you find the account named "Petty Cash"?
Balance sheet.
How do we calculate profits?
Profits = Reveune -Expenses
Go to image
On the Credit Side: Increase, Revenue
On the Debit Side: Decrease, Expenses
This method of accounting does not conform (align) with the matching principle, what method is it?
Cash Basis of Accounting.
Where are the assets, liabilities, and owner's equity listed vertically?
In the Report form.
What is an expense that a business has incurred, but hasn't paid?
Accrual/Accrued Expense.
How do you set up an income statement?
1. Prepare Statement Headings
2. List the Revenues in the first column and place the total in the second column
3. List the Expenses in the first column and enter the total in the second column
4. Calculate the Net Income/Loss
List 2 out of the 4 good questions (transaction analysis)
!!!!!DOUBLE POINTS!!!!!
1. Which accounts were affected?
2. Were the accounts A, L, OE, R, or E accounts?
3. Did the accounts increase or decrease?
4. How do you increase or decrease each account
When determining NI or NL for a period, it is important to include ONLY the revenue ______ during that period and ONLY the expenses _______ during that period to produce the revenue
Earned, Incurred
If Rayan is given a thousand dollars from revenue, what is the impact of owner's equity?
Owner's equity goes up a thousand
How many tallies are on the crash out counter?
Infinite