How will the business generate earnings and what might its expenses be?  Revenue ◦ Earnings from a business’s activities  Expenses ◦ Outgoing payment made by a business or individual required to operate a business  Income and Expense Summary Account ◦ Used at the end of the accounting cycle to post the Closing Entries and to close the temporary accounts in preparation for the next accounting period. Income Statement  Revenue’s and Expenses are summarized in the Income Statement  A financial statement that contains Revenue & Expense information for a designated period of time.

 Anticipate Revenues & Expenses for the business. ◦ What are some examples of different revenues and expenses? ◦ Brainstorm time!

Chart of Accounts  The Chart of Accounts ◦ A listing of all accounts a business needs ◦ Categorized by Assets, Liabilities, Owner’s Equity, Revenue, and Expenses (example on next slide).  Typically each category has multiple accounts ◦ Each category uses a designated set of number ranges for individual accounts  Assets (100), Liabilities (200), Owners Equity (300), Revenues (400), & Expenses (500)  These number ranges may change based on the needs of the business. ◦ Each account is assigned a number

 Assign appropriate account numbers to each identified account ◦ Assets (100), Liabilities (200), Owners Equity (300), Revenues (400), & Expenses (500)  Create a Chart of Accounts based on the numbered accounts ◦ See the next slide for the accounts associated with the sample case.

Assets 101 Cash 102 Office Equipment 103 Supplies 104 Office Furniture Revenue 401 Sales Revenue Liabilities 201 Accounts Payable/Computer’s Inc. Expenses 501 Rent Expense 502 Supplies Expense 503 Telephone Expense 504 Electricity Expense Owner’s Equity 301, Capital 302, Drawing 310 Income Summary