Research Paper on Financial Statements

Only available on StudyMode
  • Download(s) : 337
  • Published : March 17, 2013
Open Document
Text Preview
HISTORY
This Income Statement also known as the Earnings Statements or statement of operation, is one of the four Financial Statement used by accountants, business owner’s, and investors. The Income Statement provides a detailed look into how profitable a business has been over a designated period of time. OBJECTIVES

To be able to give Accounting Technology students quick reference when it comes to Income Statements.

WHAT IS INCOME STATEMENT?

This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement contains the information you’ll must often see mentioned in the press or in financial reports.

An income statement reports the profitability of the business operations for a stated period of time. It tells the uses how much revenues were earned by the business and how much expenses were incurred. The difference between the revenues and the expenses is called the net income or net loss. There is net income if the revenues exceed the expenses and a net loss if expenses exceed the revenues.

DIFFERENT KINDS OF INCOME STATEMENT
SAMPLES / ILLUSTRATION

BALANCE SHEET

The Balance sheet of the statement of financial position is a statement which illustrates the current financial standing of an entity. It gives you an idea of the development of the business throughout the period covered. It is prepared at the end of every reporting period and reported to shareholder of the business entity.

ILLUSTRATION I
After one month of operation, the financial reports of Violy’s Beauty Parlor are as follow. VIOLY’S BEAUTY PARLOR
BALANCE SHEET
August 31,19_

ASSET LIABILITIES
Cash P 2,570.00Accounts Payable P 800.00
Prepaid rent 3,000.00Notes Payable 6,000.00 Parlor Supplies 1,100.00OWNER’S EQUITY
Parlor Equipment 5,000.00ViolyCaram. Capitall21,000.00 Furniture 6,000.00
Total AssetsP 28,670.00 Total Equities P 28,670.00

INCOME STATEMENT

The income statement or also referred to as statement of Comprehensive Income, is a financial statement that shows the overall performance of the business during a particular period cover. The two most important element in preparing an income statement are the income and the expenses account.

ILLUSTRATION 2

VIOLY’S BEAUTY PARLOR
INCOME STATEMENT
For the month Ended August 31,19_
REVENUES
Service FeesP 8,250.00
OPERATING EXPENSE
Salary ExpenseP2, 900.00
Untitled Expenses 880.00
Rent Expense 1,500.00
Supplier Expense800.00
Total Expense6,080.00
Net IncomeP 2,170.00

STATEMENT OF CASHFLOW

The statement of cash flow or cash flow statement is a financial statement that shows the changes in cash assets. It records each and every inflow and outflows of cash. Practically, there are three types of cash flows that need to be recognized in the financial statements namely cash flow from operating activities, cash flows are financing activities and cash flows from investing activities.

ILUSTRATION 3
Statement of Cash Flows
________________________________________
Cash Flow from Operating Activities
Net Income$134,000
Adjustments to reconcile net income to net cash
Accts Receivable decrease $10,000
Prepaid Expense increase ($6,000)
Accts Payable Increase$35,000
Depreciation$21,000
$60,000
Net cash provided from Operating Activities$194,000
Investing Activities
Land Purchase($70,000)
Building Purchase($200,000)
Equipment Purchase($68,000)($338,000)
Financing Activities
Dividend payment to shareholders($18,000)
Issuance of Bonds...
tracking img