income statement Flashcards
what is an income statement
- reports the profitability of the company’s operations over specific period of time
- shows net profit
how to calculate profit for the period
total revenue for period - total expenses incurred in generating that revenue
what is the accrual concept
refers to accountants deciding economic life into artificial time periods which are generally months or a year and means that a business accounting year is not necessarily the same as the calendar year
what are the two different types of basis accounting
cash and accrual
what is accrual basis accounting
Accrual accounting is a financial accounting method that allows a company to record revenue before receiving payment for goods or services sold and record expenses as they are incurred and revenues when earned
what’s cash basis accounting
expenses are recognised when cash is paid and revenues when cash is received
what are the methods of depreciation
straight line and reducing balance
how do you work out residual balance
value x reducing balance minus the total that is then the value fro the next year
what is the equation of the straight line method
cost - residual value / useful life
what are bad debts
bad debts are expenses to the business
offered a good or service one credit and the buyer goes bankrupt is the debtors can not settle the debt the amount that cannot be recovered is known as a bad debt
