ASSIGNMENT 6 - Assignment 6 Chapter 3 Page 73 part 1 check your reading 1 Balance Sheet and Income Statement are the two financial statements 2(a

ASSIGNMENT 6 - Assignment 6 Chapter 3 Page 73 part 1 check...

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Assignment 6 Chapter 3 part 1 Page 73 check your reading 1. Balance Sheet and Income Statement are the two financial statements. 2. (a) Revenue : it is amount earned from the sale of the goods or services during the routine operation of the business. (b) Expense : expenses are the cost of the items or services used up in the routine operation of the business. (c) Net Income : net income is the difference between revenue and expenses when revenue is greater than expenses. (d) Net Loss : net loss is the difference between revenue and expenses when expense is greater than revenue. 3. The purpose of the income statement is to present the revenue, expenses, and net income/loss for a specific period of time. 4. Name of the company, title of “income statement” and date that the statement made and covered. 5. Revenue section and expenses section are the two parts of the income statement. 6. When the total revenue greater than the total expenses, there is a net income. 7. When the total expenses greater than the total revenue, there is a net loss. 8. (a) Income statement : it summarizes the items of revenue and expense and determines the net income or net loss for a stated period of time. (b) Accounting period : it is the period of time covered by the financial statements. (c) Balance sheet : balance sheet is a financial statement that lists the assets, liability and equity of a business at a specific date. 9. step 1 : prepare statement heading step 2 : prepare revenue section step 3 : prepare expense section step 4 : determine net income or net loss 10. Time-period principle requires the definition and use of the same period of time for the accounting period. 11. Matching principle requires the costs recorded as expenses should be matched with the revenue that help to generate during the same accounting period. 12. (a) The accrual basis of accounting matches revenue earned with expenses incurred to produce the revenue during the accounting period. (b) The cash basis of accounting recognizes revenue and expenses on a cash basis. Page 1
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Page 73-75 apply your knowledge exercise A 1. (a) Cash---------------------------- -------------asset (b) Account Payable----------- --------------liability (c) Building---------------------- ---------------asset (d) Fees Earned---------------- ----------------revenue (e) Advertising Expense----------------------expense (f) Y. Aunger, Capital--------------------------owner’s equity (g) Account Receivable-----------------------asset (h) Salaries Expense---------------------------expense (i) Commission Earned------------------------revenue (j) Bank Loan-------------------------------------liability 2 . revenue expenses net income net loss accounting period (a) $500 000 $375 000 $125 000 / one year (b) $90 000 $86 000 $4 000 / one month (c) $329 000 $362 000 / $33 000 six month (d) $290 000 $230 000 $60 000 / three month (e) $68 350 $79 800 / $11 450 one month 3. Dr. Julie Summers Income statement For the year ended December 31, 20 - Revenue Fees $225 000 Investment 9 500 $234 500 Expenses Salaries 47 000 Automobile 3 800 Supplies 4 600 Rental 24 000 Donations 4 500 Utilities 8 000 Insurance 6 500 Miscellaneous 7 000 105 400 Net Income $129 100 (According to the amount of total revenue and total expenses, revenue is greater than expense.
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