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Preparing an Income Statement LESSON 7-1
An income statement reports financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss. Expenses are the amounts a business pays to operate the business and earn the revenue. The revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period. INCOME STATEMENT
LESSON 7-1 3 INCOME STATEMENT INFORMATION ON A WORK SHEET page 182
LESSON 7-1 4 HEADING OF AN INCOME STATEMENT 1 2 3 page 182 1.Center the name of the company on the first line. 2.Center the name of the report on the second line. 3.Center the date of the report on the third line.
LESSON 7-1 5 REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT 1 Revenue 3 Revenue amount 4 Expenses 5 Account titles 6 Expense amount 8 Total expenses 9 Total of expenses 12 Net Income 7 Single line 11 10 Calculate net income 14 Double lines 13 Record net income 2 Account title page 183
The percentage relationship between one financial statement item and the total that includes that item is called a component percentage. On an income statement, component percentages are calculated by dividing the amount of each component by the total amount of sales. Total Expenses/Total Sales = Total Expenses Component Percentage Net Income/ Total Sales = Net Income Component Percentage COMPONENT PERCENTAGE
LESSON 7-1 7 COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT page 184
LESSON 7-1 8 INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS 1 Revenue 3 Revenue amounts 2 Account titles 6 Net Loss 7 Record Net Loss 5 Total Revenue 4 Total of revenue page 185
stakeholders component percentage LESSON 7-1 9 TERMS REVIEW page 186
Balance Sheet Information on a Work Sheet LESSON 7-2
A Balance Sheet contains what information? Assets, Liabilities and Owner’s Equity Assets = Liabilities + Owners Equity (LEFT SIDE-Left Side of Balance Sheet) = (RIGHT SIDE-Right Side of Balance Sheet) BALANCE SHEET
LESSON 7-2 12 BALANCE SHEET page 187
LESSON 7-2 13 HEADING OF A BALANCE SHEET page 187 1 2 3 1.Center the name of the company on the first line. 2.Center the name of the report on the second line. 3.Center the date of the report on the third line.
LESSON 7-2 14 ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188 4 Liabilities 1 Assets Total Liabilities8 2 Account titles 3 Asset amounts Single line 7 6 Liability amounts 5 Account titles Total of liabilities 9
LESSON 7-2 15 OWNER ’ S EQUITY SECTION OF A BALANCE SHEET page 189 7 Total Liab. and Owner ’ s Eq.5 Total Assets 1 Owner ’ s Equity 2 Account title 3 Capital amount 4 Single line 6 Total of assets 8 Total of Liabilities and Owner ’ s Equity 9 Compare totals 10 Double lines
LESSON 7-2 16 OWNER ’ S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET page 190 2 Beginning capital amount 6 Difference 8 Current capital amount 1 Beginning capital 3 Net Income 4 Drawing Ending capital 7 9 Total Liabilities and Owner ’ s Equity 5 Single line
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