What is the income statement quizlet?

Q: What is in the income statement?

An income statement shows a companys revenues, expenses and profitability over a period of time. It is also sometimes called a profit-and-loss (P&L) statement or an earnings statement. It shows your: revenue from selling products or services. expenses to generate the revenue and manage your business.

Q: What is the purpose of the income statement quizlet?

The purpose of the income statement is to show a companys profitability during a specific period of time. The difference (or net) between the revenues and expenses for the company is often referred to as the bottom line and it is labeled as either Net Income of Net Loss. Also known as the Profit & Loss Statement.

-temporary accounts track financial results for a limited period of time like expenses, revenues, and dividends
*revenues are usually credit accounts but to close it you debit it
*expense accounts are usually debit accounts but to close it you credit it
-permanent accounts track financial results from year to year, we want a running total for liabilities, assets, and equity and don't want to close these out. Only close these at the end of the year
-at the end of the accounting period, companies transfer the temporary account balances to the permanent stockholders equity account--retained earnings
-transfer net income/loss and dividends to retained earnings
-establish zero balances in all income statement and dividend accounts

Table of Contents Show

What is in the income statement?
What is the purpose of the income statement quizlet?
What is the income statement also known as?
What is the purpose of the income statement?

-Example-
debit pizza revenue 10,000
credit wages expense 1,000
credit supplies expense 1,000
credit rent expense 1,000
credit depreciation expense 1,000
credit income tax expense 1,000
credit retained earnings 5,000
*get retained earnings by subtracting expenses from revenue THEN... for dividends...
debit retained earnings (-SE) 1000
credit dividends declared (-D) 1000

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Terms in this set (25)

All companies expect to receive cash in exchange for providing goods and services, but the timing of cash receipts does not dictate when revenues are recognized. Instead, the key factor in determining when to recognize revenue is whether the company has provided goods or services to customers during the accounting period. Regardless of the length of the period (month, quarter, or year), cash can be received (1) in the same period the goods or services are provided, (2) in a period before the goods or services are provided, or (3) in a period after the goods or services are provided.
(98, 3.5)
1. Cash is received in the same period the goods or services are provided.
2. Cash is received in a period before goods or services are provided. An example is when the company receives cash for gift cards that customers use to pay for goods in the future. This obligation is a liability called "Unearned Revenue", and it is recorded on the balance sheet equal in amount to the cash received for the gift card.
3. Cash is to be received in a period after goods or services are provided. This situation typically arises when a company sells to a customer on account. Selling on account means that the company provides goods or services to a customer not for cash, but instead for the right to collect cash in the future. This right is an asset called Accounts Receivable.

Profit earned from each dollar of revenue. (112)
Net Profit Margin = Net Income / Total Revenue
Example: Currently, Pizza Aroma's accounting records report revenues of $15,500 and expenses of $8,100, $600, and $400, suggesting a net income of $6,400. This $6,400 of net income is about 41.3% of the $15,500 of revenues ($6,400 ÷ 15,500 = 0.413). This net profit margin, as it is called, implies that Pizza Aroma earned 41.3 cents of net income from each dollar of pizza revenue.

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What is in the income statement?

An income statement shows a company's revenues, expenses and profitability over a period of time. It is also sometimes called a profit-and-loss (P&L) statement or an earnings statement. It shows your: revenue from selling products or services. expenses to generate the revenue and manage your business.

What is the purpose of the income statement quizlet?

The purpose of the income statement is to show a company's profitability during a specific period of time. The difference (or "net") between the revenues and expenses for the company is often referred to as the bottom line and it is labeled as either Net Income of Net Loss. Also known as the Profit & Loss Statement.

What is the income statement also known as?

An income statement (also known as a profit and loss or P&L statement) documents a business' revenue and expenses. Along with a balance sheet, cash flow statement and statement of owner's equity, it's one of the four major financial statements that a business uses to track overall financial health.

What is the purpose of the income statement?

The income statement presents information on the financial results of a company's business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what costs it incurred in connection with generating that revenue.