Ch03+-+Income+Statement - Chapter 3 The Income Statement...

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Unformatted text preview: Chapter 3 The Income Statement Overview Expanded Transaction Analysis Model Accrual Accounting 3-1 What Does Net Income Tell Users? One of the most meaningful figures that a company reports Significant measure of past performance Indicates potential for future prospects 3-2 What Does Net Income Tell Users? Intel posts biggest profit in a decade, with CNBC's Herb Greenberg and Adam Benjamin, Jefferies. 3-3 How is the Income Statement Prepared? What business activities affect the income statement? How are these activities recognized and measured? How are these activities reported on the income statement? B&N sells a book to a customer? When should the sale be recognized and for how much? Where does the sale appear on the income statement? 3-4 Operating Cycle: Merchandiser 3-5 Expanded Transaction Analysis Model 3-6 Contributed Capital + Retained Earnings Debit- Credit + Debit- Credit + A = L + SE A = L + SE Assets Debit + Credit- = Liabilities Debit- Credit + 3-7 Retained Earnings Components of Retained Earnings Revenues Debit- Credit + Expenses Dividends 3-8 Preparing an Income Statement Does it make sense to record all expenses and revenues in retained earnings? How would you prepare an income statement? Rent expense 800 Salaries expense 650 Interest expense 450 Salaries expense 1,000 Rent expense 400 Dividends Retained Earnings 1,000 Sales revenue 1,100 Interest revenue 3,000 Sales revenue 200 Interest revenue 4,500 Sales revenue Preparing an Income Statement 3-9 Add up each individual revenue and expense account: Is this feasible for a company that may have millions of transactions?...
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This note was uploaded on 05/04/2011 for the course BUS 103 taught by Professor Opp during the Fall '10 term at University of California, Berkeley.

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Ch03+-+Income+Statement - Chapter 3 The Income Statement...

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