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The Income Statement

The Income Statement. Your Homework Was…. Exercise 1-A on page 124 Exercise 3 on page 126. Remember…. Revenue: CR !!! Expenses: DR !!! (Commit this to memory !). GAAP. Revenue Recognition

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The Income Statement

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  1. The Income Statement

  2. Your Homework Was… • Exercise 1-A on page 124 • Exercise 3 on page 126

  3. Remember…. • Revenue: CR !!! • Expenses: DR !!! • (Commit this to memory!)

  4. GAAP • Revenue Recognition • Revenue recognition states that revenue must be recorded (recognized) at the time the transaction is completed.

  5. Income statement • The Income Statement tells managers, bankers, and investors whether a business is profitable or not. • It is a formal statement that shows Revenue and Expenses of a business over a period of time. (Usually over the fiscal year.) • Revenue – Expenses = Net Income

  6. Remember that the Income Statement covers a period of time. • (How much $ in sales there were during that time vs. the business’ expenses) • The ‘date’ part of the heading should reflect that. • ‘For the year ended December 31, 2015’ • ‘For the month ended, March 31, 2012’

  7. GAAP • The Time Period Concept • The time period concept provides that accounting will take place over specific time periods known as fiscal periods.

  8. The Matching Principle • The matching principle states that expense items related to revenue must be recorded in the same period as the revenue it helped to earn. • eg. Advertising

  9. The Trial Balance • The trial balance procedure is unchanged • List all the accounts • List their debit and credit balances • Add each column up. (and double underline!)

  10. Assets, Liabilities, Equity go to the Balance Sheet. • Revenues, Expenses, & Drawings go to the Income Statement.

  11. Homework… • Page 134 • Exercise 2-A,C • Exercise 5-A,B,C,D

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