In the financial industry there are four statements that need to be prepared by the businesses at the end of each quarter and end of company’s fiscal year. There is the balance sheet, statements of cash flow, statements of retained earnings and the income statement. Within this essay, I will be explaining on how and why we use one of the statements; which is income summary. I will also be describing if the account is a temporary or permanent account. The following is the definition of income summary; it’s a temporary account into which revenues and expenses are transferred prior to their final transfer into the capital account. The income statement is a summary of a business expenses and revenues during a specific period of time; usually it can be quarterly or one year statements. Income statement is also known by the term of Profit and loss, statement of earnings or statement of operations. The report summarizes the net income (or net loss) for the period by collecting the sum of all the expenses (a debit) and the sum of all the revenues (a credit). The format of the income statement or the profit and loss statement will vary according to the complexity of the business activities. However, most companies will have the following elements in their income statements:
A. Revenues and Gains
1. Revenues from primary activities
2. Revenues or income from secondary activities
3. Gains (e.g., gain on the sale of long-term assets, gain on lawsuits)
B. Expenses and Losses
expected to flow to the entity
Liabilities are debts that are payable to outsiders called creditors
Equity is the residual interest in the assets of the entity after deducting all of its liabilities
Income refers to all increases in equity other than investments by owners
Revenue is that part of income arising from ordinary activities
Expenses decrease equity by using up assets or increasing liabilities in order to deliver goods or services to customers
Apply the accounting equation to analyse transactions…
accounting worksheet given on the following page to make the necessary adjusting entries and to compute the adjusted trial balance, income statement, and balance sheet amounts. Key the adjustments by transaction letter.
Requirement 3, continued
JAKE’S COMPUTER REPAIR SERVICE
MONTH ENDED MARCH 20x1
Adjusted Trial Balance
the financial statement are the income statement, owner’s equity statement, and the balance sheet. The income statement calculates service revenue and all the expenses from the adjusted trial balance. The balance sheet calculates all the assets, liabilities, owner’s capital, and owners drawing. When we total the debit and credit of these two financial statements if the debit is more than the credits then it is a net loss and if vice versa then there is a net income. Owner’s equity statement will calculate…
“temporary accounts” because they are closed at the end of the year. All other accounts are permanent accounts.
Steps in preparing closing entries:
1. Close revenues to Income Summary.
2. Close expenses to Income Summary.
3. Close Income Summary to RE.
4. Close dividends to RE.
Income Summary – a temporary account only used during the closing process.
Post-closing trial balance – shows all permanent accounts.
Cash Basis Accounting versus Accrual Basis Accounting:…
Retained Earnings, Common Stock, Dividends/Revenue(contra-equity accounts)
Formula: Capital – Dividends(Drawings) + Revenue – Expenses OR
Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenue.
-Financial Statements: Income, Retained Earnings, Balance Sheet, Cash Flow
^BALANCE SHEET- Current assets are those to be used or turned into cash within the upcoming year,
NonCurrent assets are those that will last longer than one year.…
treated for purposes of federal tax income?
Applicable Law & Analysis:
From the information that was provided, the income was derived from the business and this gross income is taxable pursuant to Code§1.61-3(a). He is subject to self-employment tax, since the total amount of income that will come through to his personal tax income of half of the self-employment tax liability.
John will have to pay self-employment tax, which is the gross income that obtained in business in the…
variables, ”income”, “size”, “year” and “credit balance”. Each of them has a kind of relation that can link together, and because of that we can be able to pair out 10 different pairs of variables. In the following report, we are going to discuss 3 set of individual variable and 3 pair of variable by using statistic information.
The 1st individual variable is the “Location” and because it is a qualitative variable by which we may not shown the result by using the five numerical summaries. However…
•The accounting cycle
statements from a
The Accounting Information
•Debits and credits
•Accounting equation •Posting…