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Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 1 Expanded Ledger  Income Statement: Revenue, Expenses Drawings REF CHAPTER 5, P. 118-124.

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Presentation on theme: "Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 1 Expanded Ledger  Income Statement: Revenue, Expenses Drawings REF CHAPTER 5, P. 118-124."— Presentation transcript:

1 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 1 Expanded Ledger  Income Statement: Revenue, Expenses Drawings REF CHAPTER 5, P. 118-124 Practice: p.124 exercises #1,2,4 p. 126 exercises #3,5

2 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 2 Revenue, Expenses & Drawings (dividends) When a company earns money  the equity section of the balance sheet _________ When a company pays expenses and / or the owner takes money out of the business for personal use  the equity section of the balance sheet __________.

3 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 3 Revenue, Expenses & Drawings (dividends) REVENUES:  EXPENSES:  DRAWINGS (or DIVIDENDS if a corporation) 

4 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 4 Example: Burt’s Pigeon Clean-up Inc. cleaned the sidewalk in front of the school and invoiced the school $500. remember double entry accounting DR=CR  Revenue (making money) increases equity  Increases in equity are credit entries  Revenue accounts are credited A/RRevenue

5 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 5 are things (costs) that the company has to pay for in order to make revenue. Expenses ________ equity. Examples of expenses:

6 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 6 Example: Burt’s Pigeon Clean-up Inc. cleaned the sidewalk in front of the school and invoiced the school $500. On payday, Burt paid Earnie and Elmo $100 each for their clean up of the school; the cost of cleaning material for the job was $75.  Expenses (spending money) _________ equity  Decreases in equity are _______ entries  Expense accounts are debited Wages Exp.Supply Exp.Bank

7 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 7 Most businesses usually have one (sometimes a few) revenue accounts. All expense accounts will usually have a debit balance. Businesses have many different expense accounts.

8 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 8 NET INCOME (NET LOSS): The difference between the revenues and the expenses for a time period represents the profit for the business.  Revenue – Expenses = Net Income or Profit Revenue Expenses = Net Profit  Revenue Expenses = Net Loss

9 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 9 DRAWINGS An owner of a business is entitled to some of the profits of the company, thus may withdraw money from the company (like a salary or dividends if a corporation) on a regular basis. Drawings ___________ equity Decreases in equity are debit entries Drawings accounts are _______  However, drawings are ____________ because they have no bearing on the net income of the business (equity yes, profits no!)

10 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 10 Example: Bert withdraws $200 cash and $50 of cleaning supplies form his company for personal use. Drawings BankSupplies

11 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings 11 Sample Income Statement: Bert's Pigeon Cleaning Ltd. Income Statement For the Month Ending July 30, 2--- Revenue Cleaning Fees$15,500 Expenses Advertising550 Vehicle2040 Wages7000 Other275 Total Expenses9865 Net Income$5,635


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