1. The Income Statement
Chapter 3

2. Thus far... What financial statement have we discussed?
The Income Statement
Thus far...
What financial statement have we discussed?
What does it ‘tell’ the reader?
What other information would you like to know about a business that cannot be found on the statements we have looked at?
In other words, how can you tell if a business is successful or not?

3. Defining Profit and Loss
New terms – profit, revenue, expenses, net income, net loss, income statement, accounting period
Using your list of key terms match the appropriate term and definition

4. The Income Statement
2nd major financial statement that every business prepares
1st was the Balance Sheet!
Summarizes revenues and expenses for a company
Determines net income or net loss
Completed for a stated period of time, called the accounting or fiscal period

5. Common Revenue & Expense Accounts
Expenses
Sales
Revenue
Income
Fees Earned
Rent Earned
Any amounts earned by the business!
Rent Expense
Salaries
Utilities
Maintenance Expense
Telephone
Any bills already paid by the business!

6. Income Statement Preparation
Prepare heading (Who? What? When?)
Note that Income Statements are completed for a period of time!
Prepare Revenue section – all money earned from the sale of goods or services
Prepare Expense section – the cost of items or services used up in the operation of the business
Determine Net Income or Net Loss

7. Example – Goldman’s Gym
Header
Notice the date!
Revenue Section
Expense Section
Net Income or Loss