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    Financial and Managerial Accounting

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    This document introduces the four basic financial statements used in accounting: the income statement, retained earnings statement, balance sheet, and statement of cash flows. It provides an overview of each statement, including what type of financial information is presented (revenues/expenses over time for the income statement and statement of cash flows, changes in retained earnings over time for the retained earnings statement, assets/liabilities/equity at a point in time for the balance sheet). It also provides an example income statement and explains the basic accounting concept of matching revenues and expenses.

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    Financial and Managerial Accounting

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    cons the
    133 views1 page
    This document introduces the four basic financial statements used in accounting: the income statement, retained earnings statement, balance sheet, and statement of cash flows. It provides an overview of each statement, including what type of financial information is presented (revenues/expenses over time for the income statement and statement of cash flows, changes in retained earnings over time for the retained earnings statement, assets/liabilities/equity at a point in time for the balance sheet). It also provides an example income statement and explains the basic accounting concept of matching revenues and expenses.

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    Financial and Managerial Accounting (49)

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    Financial and Managerial Accounting (49)

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    This document introduces the four basic financial statements used in accounting: the income statement, retained earnings statement, balance sheet, and statement of cash flows. It provides an overview of each statement, including what type of financial information is presented (revenues/expenses over time for the income statement and statement of cash flows, changes in retained earnings over time for the retained earnings statement, assets/liabilities/equity at a point in time for the balance sheet). It also provides an example income statement and explains the basic accounting concept of matching revenues and expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    133 views1 page

    Financial and Managerial Accounting

    Uploaded by

    cons the
    This document introduces the four basic financial statements used in accounting: the income statement, retained earnings statement, balance sheet, and statement of cash flows. It provides an overview of each statement, including what type of financial information is presented (revenues/expenses over time for the income statement and statement of cash flows, changes in retained earnings over time for the retained earnings statement, assets/liabilities/equity at a point in time for the balance sheet). It also provides an example income statement and explains the basic accounting concept of matching revenues and expenses.

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    of 1

    Chapter 1 Introduction to Accounting and Business

    15

    Order
    Prepared Financial Statement Description of Statement
    1. Income statement A summary of the revenue and expenses for a specific period of
    time, such as a month or a year.
    2. Retained earnings A summary of the changes in retained earnings that have
    ­statement ­occurred during a specific period of time, such as a month or a year.
    3. Balance sheet A list of the assets, liabilities, and stockholders’ equity as of a s­ pecific
    date, usually at the close of the last day of a month or a year.
    4. Statement of A summary of the cash receipts and cash payments for a specific
    cash flows period of time, such as a month or a year.

    The four financial statements and their interrelationships are illustrated in Exhibit 6,
    on page 17. The data for the statements are taken from the summary of transactions
    of NetSolutions on page 13.
    All financial statements are identified by the name of the business, the title of the
    statement, and the date or period of time. The data presented in the income statement,
    the retained earnings statement, and the statement of cash flows are for a period of
    time. The data presented in the balance sheet are for a specific date.

    Income Statement
    The income statement reports the revenues and expenses for a period of time, based Note:
    on the matching concept. This concept is applied by matching the expenses ­incurred When revenues exceed
    during a period with the revenue that those expenses generated. The excess of the expenses, it is referred to
    as net income,
    revenue over the expenses is called net income, net profit, or earnings. If the ­expenses net profit, or earnings.
    exceed the revenue, the excess is a net loss. When expenses exceed
    The revenue and expenses for NetSolutions were shown in the equation as revenues, it is referred to
    separate increases and decreases. Net income for a period increases the stockhold- as net loss.
    ers’ equity (retained earnings) for the period. A net loss decreases the stockholders’
    equity (retained earnings) for the period.
    The revenue, expenses, and the net income of $3,050 for NetSolutions are reported
    in the income statement in Exhibit 6. The order in which the expenses are listed in
    the income statement varies among businesses. Most businesses list expenses in order
    of size, beginning with the larger items. Miscellaneous expense is usually shown as
    the last item, regardless of the amount.

    Example Exercise 1-4 Income Statement


    The revenues and expenses of Chickadee Travel Service for the year ended April 30, 2014, are listed below.
    Fees earned $263,200
    Miscellaneous expense 12,950
    Office expense 63,000
    Wages expense 131,700
    Prepare an income statement for the current year ended April 30, 2014.

    Follow My Example 1-4


    Chickadee Travel Service
    Income Statement
    For the Year Ended April 30, 2014
    Fees earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $263,200
    Expenses:
      Wages expense . . . . . . . . . . . . . . . . . . . . . . . . $131,700
      Office expense . . . . . . . . . . . . . . . . . . . . . . . . 63,000
      Miscellaneous expense . . . . . . . . . . . . . . . .    12,950
      Total expenses . . . . . . . . . . . . . . . . . . . . . . 207,650
    Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,550

    Practice Exercises: PE 1-4A, PE 1-4B

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