Teresa A Arledge
Dr. Laura Forbes
January 28, 2012
According to Gapenski, financial accounting involves identifying, recording, and communicating the operational results and status of an organization. Financial accounting information is conveyed by a business’s financial statements. The three most important are: income statement, balance sheet, and statement of cash flows. The need for financial statements is to provide accounting information to outside investors so they will have reliable information regarding the financial status of the organization. However, the information presented in financial statements is as important to managers as it is to investors. Perhaps the most important question about a business’s financial status is whether or not it is making money.
According to Gapenski, the income statement provides information about a business’s operations and economic profitability. The income statement has often been called by other names such as statement of operations and statement of activities. The income statement reports the results of operations over some period of time, say a year. It has three key elements: Revenues represent both cash received and payer obligation. Expenses are resources required to produce the goods or services. Net income is the profit, and it equals revenues minus expenses.
In this assignment I will illustrate an income statement for Brand wine Homecare which is a not -for profit business. In 2007 Brandywine Healthcare had $12 million in revenues in 2007. The organizations expenses other than depreciation totaled 75 percent of the revenues, and depreciation expenses were 1.5 million. All revenues were collected in cash during the year and all other than depreciation were paid in cash. I will construct Brandywine’s 2007 income statement.
Brandy wine’s 2007 income statement (in millions):
Total revenues……………………. $12.0
All but depreciation (75%)…………..$9.0
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