Unformatted text preview: oan 5,000 Inventory 14,000 Accounts Payable 1,200 Accounts Receivable 2,200 Total Liabilities Equipment 4,600 6,200 Equity Paid in Capital 15,000 Retained Earnings 8,100 Total Equity Total Assets 29,300 23,100 Total Liabilities &
Equity 29,300 Download free ebooks at bookboon.com
32 The Income Statement Managing Budgets It’s important to realize that just because the organization has a positive Net Income for the month, that
doesn’t mean that they have that amount in cash available. Income can include more than just cash, such
as interest earned from investments or financing could also be included as Retained Earnings. In order to
know exactly what cash is still available at the end of the month, you would create a Cash Flow Statement.
We’ll look at how to do that in the next chapter. 5.3 What an Income Statement Tells You
The income statement tells you: The main sources of income earned Secondary sources of income earned Some information about the organization based on the categories of revenue that
are listed. For example, “Sales Revenue” tells you that the organization sells a
product or service, while “Fees Earned” would tell you that the organization is a
professional service provider of some kind. What items have no value left for the company because they are expenses – they
will not generate any new income for the organization Whether or not the organization is operating with a loss or if they are operating
with balanced revenues and expenses Download free ebooks at bookboon.com
33 The Income Statement Managing Budgets 5.4 What an Income Statement Does Not Tell You
We’ve already mentioned in our discussion of Income Statements some of the things that it does not tell
you. But here is a full list. An income statement does not tell you:
Any prediction for future net income. The Income Statement is a historical document in the sense
that it tells you what has already happened. It cannot be relied upon as a predictor of what will
happen in future accounting periods. Please click the advert Download free ebooks at b...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.
- Fall '13