Income Statements Let’s Go Over the Terms. Definitions Income Statement Revenue Expenses Drawings An Income Statement is a financial report that shows.
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<ul><li> Slide 1 </li> <li> Income Statements Lets Go Over the Terms </li> <li> Slide 2 </li> <li> Definitions Income Statement Revenue Expenses Drawings An Income Statement is a financial report that shows us the revenue, subtracts expenses, and reveals profit made over a period of time. Also called Income. It is an increase in equity that comes from the sale of goods or services in the usual course of business. Expenses are decreases in equity that comes from operating the business. Drawings are decreases in equity made by the owner for use outside of business costs. </li> <li> Slide 3 </li> <li> Easy Way to Remember REVENUES EXPENSES DRAWINGS </li> <li> Slide 4 </li> <li> Why Do we Expand the Ledger? Much more accurate picture of what the business is doing. Shows money in, money out, and what it is being spent on. </li> <li> Slide 5 </li> <li> Lets look at some Nets Net Income Net Loss If total revenues are more than the total expenses, the business has gained Net Income. A Net loss is when the expenses are higher than the revenues. </li> <li> Slide 6 </li> <li> Who uses Income Statements? Owners and Managers Bankers Investors Income Tax Authorities Planning decisions? Hiring? Company goals? Correcting mistakes? Can they pay the loan back? Can I make money by investing? Are they making a profit? How much tax do they owe the government? </li> <li> Slide 7 </li> <li> Chart of Accounts In most businesses, accounts are given code numbers. It is usually a 4-digit number. Quick identification is its purpose. </li> <li> Slide 8 </li> <li> Chart of Accounts A Chart of Accounts is a list of the ledger accounts with their numbers listed in ledger order. Most businesses have a copy of this list for employees to see and learn. </li> <li> Slide 9 </li> <li> Equity Section Summary There are four types of accounts in the equity section: 1. Capital Normally only has the beginning equity and new investments from the owner. Normally a credit balance if business is doing well. 2. Revenues Increases come from the sale of goods or services. 3. Expenses Decreases in equity because of costs of materials or services used to produce revenue. 4. Drawings - Decreases in equity resulting from the owner taking money out for personal use. </li> <li> Slide 10 </li> <li> What is wrong with this Income Statement? </li> <li> Slide 11 </li> <li> #2 Prepare a Chart of Accounts for Express Air Services using these accounts. </li> <li> Slide 12 </li> <li> Page 142, #3 Lets look at the T-Account Ledger for Emily Stokaluk. Put it into a trial balance. Prepare a chart of accounts. Prepare an income statement for the month of March. </li> <li> Slide 13 </li> <li> Page 142, #4 Sean ONeill operates a home renovation business called Meadowlark Makeovers. He was fully occupied during the month of July working on a kitchen renovation. His daughter just started doing the bookkeeping for the business. She was pleased that she was able to balance the ledger using the debit and credit theory she learned in high school. </li> <li> Slide 14 </li> <li> Here is Seans Capital Account </li> <li> Slide 15 </li> <li> Divide up the Capital account into T-Accounts. We have to figure out what it is that he has spent his money on. </li> <li> Slide 16 </li> <li> Slide 17 </li> </ul>
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