Income/ OE (retained earnings) statements

Question 1

Presents the revenues, expenses, and resulting net profits for a given period
-First financial statement when done in order

Answer 1

Income statement

Question 2

One of the two account types shown on an income statement that shows an inflow of assets (usually cash) as a result of selling a product or providing a service

Answer 2

Revenue

Question 3

What are some examples of revenue?

Answer 3

-Sales revenue
-Service revenue
-Interest rate
-Dividend income (revenue)
-Gain of the sale of assets

Question 4

One of the two account types shown on an income statement that shows a decrease in assets (usually cash) other than withdraws by the owner, which result from efforts to produce revenue

Answer 4

Expense

Question 5

What are some common expenses?

Answer 5

-Cost of goods sold
-Wage expense
-Salary expense
-Rent expense
-Supplies expense
-Research and development expense (R&D)
-Selling, general, and admin expense
-Depreciation expense
-Amortization expense
-Interest expense
-Losses on the sale of assets

Question 6

What is the Cost of goods sold?

Answer 6

Ex. a business buys an $800 casket, then sells it for $1300. The cost of sale would be the left over. So:
$1300 - $800 = $500 profit

Question 7

What is the equation used on income statements?

Answer 7

Calculating for net income = the difference between revenues and expenses.
Net income = total revenues for the period - total expenses for the period

Question 8

In terms of a sale being recorded on an income statement, what is cash basis accounting?

Answer 8

Revenue is not recognized in the accounting record until received and in which expenses are not recognized until paid.
-Ex. if someone bought something on Dec 31 and it was delivered Jan 2nd, it would not go into the record until the 2nd

Question 9

In terms of a sale being recorded on an income statement, what is accrual accounting

Answer 9

Recording in each fiscal period applicable expenses, whether income paid or not and whether collected or not.
-Ex. if someone bought something on Dec 31 and it was delivered Jan 2nd, it goes on the record as taking place on Dec 31st

Question 10

Financial statement that summarizes all changes in owner’s equity during a specific period
-Second financial statement when prepared in order

Answer 10

Retained earnings

Question 11

What is the equation used when looking at a Retained earnings statement

Answer 11

Ending balance of retained earnings = Beginning retained earnings + Net income - dividends

Question 12

What is the expanded accounting equation?

Answer 12

ALOE RED
Assets = Liabilities + OE + revenues - expenses
- dividends

Question 13

Shows how much cash was generated or spent in each of the three business activities:
-Operating
-Investing
-Financial

Answer 13

Statement of cash flow