L2, L6Introduction to the Income Statement

L2, L6Introduction to the Income Statement - Introduction...

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Introduction to the Income Statement Revenues and expenses, as learned in the previous lesson, determine the net income (profit) of a business. If a business earns more revenue than it pays in expenses, it earns a net income . However, if a business earns less revenue than it pays in expenses, it suffers a net loss . In this lesson, we will learn how to create an income statement , a formal financial statement that presents the revenues and expenses of a business for a given period of time. An income statement summarizes the revenues and expenses, and the net income or net loss of a business over a given period of time. It is important, when creating an income statement, that the fiscal period is specified. The fiscal period is the period of time over which the net income or loss is measured. If you knew that a business earned $1,000 profit, it would be important to know if that $1,000 was earned in a day, a month, or a year. Most businesses report earnings over a fiscal year (which may be January to December, or may be some other year-long period). Some businesses also report earnings more frequently, like quarterly or monthly. The steps to creating an income statement are as follows: 1) Create a heading: Who? (the name of the business) What? (the name of the statement) When? (the period over which the revenues and expenses are measured) 2) List and total the revenue accounts with a subheading at the top. 3) List and total the expense accounts with a subheading at the top.
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L2, L6Introduction to the Income Statement - Introduction...

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