Income Statement Flashcards
What is income statement
The main income generating activity of a firm is also referred to as the revenue of the firm. Firms may also earn income from investing in shares(dividends received) or term investments (interest revived) or assets like buildings (rent received).
I stands for Income/Main Income
OI stands for Other Income
What are distribution expenses
NOTE: Cellphone - distribution. Telephone - administrative
Distribution or service costs – the expenses directly related to selling your inventory or delivering your service.
Distribution Cost, also called distribution expenses, are costs that are incurred to deliver your product from the production unit to the end user (your customer). WAGES FOR WORKERS THAT PROVIDE THE PRODUCT LIKE TRADIES ALSO COUNT AS DISTRIBUTION COSTS.
What are administration expenses
the expenses directly related to the office work or paper work of the business, which keep the business running and ensure accounting records are kept. Appointments are made, government regulations are followed, the business is insured, debtors pay their accounts and creditors ae paid on time.
Administrative expenses are costs that relate to regular business operations. Administrative expenses can be fixed or semi-variable. Common examples include rent, utilities, equipment, supplies, insurance policies, salaries, benefits and legal counsel.
What are finance costs
the expenses directly related to financing your business with borrowed money – interests on loans, mortgages and bank overdraft interest.
Financing cost, also known as the cost of finances, is the cost, interest, and other charges involved in the borrowing of money to build or purchase assets. This can range from the cost it takes to finance a mortgage on a house, to finance a car loan through a bank, or to finance a student loan. If the expenses are related to the bank but the expense is not RELATED TO INTEREST, then it has to go to Administrative Expenses and not Financial Expenses. Ex. Bank Charges = AC because it is not interest
What is debit
Debit
Debit is DR
Debit is money going out or Expenses
What is credit
Credit
Credit is CR
Credit is money coming in or Income
What are fees
In accounting, “fees” refer to the amounts charged or earned for services rendered or for certain privileges granted. Fees are distinct from the sale of goods, as they pertain specifically to services.
It is money earned from a business performing a service or selling a product
What are rates
Rates are property tax for non-domestic properties. It is property tax for a business occupying a property for business. Rates are always expenses that go under Administrative Expenses
What are the rules for the income statement table
Expenses must go in the first column
Income must go in the second column
Profit and loss or surplus deficit must go in the last column
Total income and total expenses will also go into the last column
Put spaces between each expense and profit
Circle/highlight profit or loss in the Profit/Loss to show if you made or lost money.
Show distinction between Main and Other income
Add dollar sign above the 3 columns for profit, expenses and profit/loss so you do not have to use the dollar signs for every value
Add total expenses for the 3 expenses into the second column.
Expenses must go in first column
Total expenses for each small group (necessary and unnecessary expenses) go in second column
Total expenses for all expenses go in third column
Income goes in second column
Total income goes in third column
If one category has only 1 item, put its value in the second column for the total of that category
