Income Statement Flashcards
Revenue
Total amount earned by a business by selling/performing goods/service
Account name for revenue
Earnings
Expenses
Cost of g/s used up in the routine operation of business
Business definition
Makes money
- Provide a g/s
- Satisfy customer
- Make profit
Primary Revenue
Main source of income from business
Secondary Revenue
Secondary source of income
Net Income
Difference in value between revenue and expense but revenue is bigger
Net Loss
Difference in value between revenue and expense but expense is bigger
Net Income vs Net profit
Income = service
Profit = merchandising
Income Statement Equation
R - E = Net income/Loss
Income Statement Format
Presents revenue, expenses, and Net Income over a period of time
Accounting Period
Time frame used for financial reporting
Why do we separate earnings, expenses, drawing?
To show people in depth the finances of a business
Drawings
Withdrawal of funds/assets by owner of business. Use for paying yourself
Expenses and Revenue and Drawings only increase or decrease?
Increase
Why do you add name in Capital/Drawings
If you have a partnership business, you will need to create two of the same accounts with the two people to track the two different transactions they are making
What can decrease owner’s equity
Withdrawal of cash for personal use
Removing merchandise for personal use
Taking equipment from business for personal use
Using company’s assets for personal use
What is Accural Basis Accounting?
Not GAAP but an accounting method; records revenue and expenses when service has been performed and when expenses get demanded
What is Time Period Principale?
Record financial statemtens within time periods; defines the accounting period; GAAP
What is Matching Principale?
Expenses should be recorded to match with revenue; GAAP
What is Revenue Recognizition Principale?
Revenue is recorded when it’s earned; when you perform service; GAAP
What are two GAAPs that make up Accural Basis Accounting?
Matching and Revenue Recognition Principale
What is the Expanded Ledger Equation?
Begainning Captial +/- Net Income/Net Loss - Drawings = Ending Captial
