The Income Statement

1
The Income Statement
SECTION 9.1
2
The Income Statement
SECTION 9.1

• Financial Statements
• The financial statements often prepared for a
  sole proprietorship are
• the income statement.
• the balance sheet.
• the statement of changes in owners equity.
• the statement of cash flows.

3
The Income Statement
SECTION 9.1

• The Income Statement
• The income statement reports net income or net
  loss for a defined period of time. It is
  sometimes called a profit-and-loss statement or
  an earnings statement.
• Income _________ - ___________
• EXAMPLE

4
The Income Statement
SECTION 9.1

• Income Statement Sections
• The income statement contains the following
  sections
• the heading
• the revenue for the period
• the expenses for the period
• the net income or net loss for the period

5
The Income Statement
SECTION 9.1

• Heading
• The heading of an income statement has three
  parts
• the name of the business (Who?)
• the name of the report (What?)
• the period covered (When?)

6
The Income Statement
SECTION 9.1
7
The Income Statement
SECTION 9.1

• Reporting a Net Loss
• If total expenses exceed total revenue, a net
  loss exists.
• To record a net loss
• Enter the net loss amount in the second amount
  column beneath the total expenses amount.
• Write Net Loss to the left of this value.

8
The Statement of Changes in Owners Equity
SECTION 9.2

• The statement of changes in owners equity
  summarizes the changes in the owners capital
  account as a result of business transactions that
  occur during the period.
• The information to prepare this statement is
  found in
• the work sheet
• the income statement
• the owners capital account in the general ledger

9
The Statement of Changes in Owners Equity
SECTION 9.2

• Completing the Statement of Changes in Owners
  Equity
• Below is an example of a completed statement.

10
The Statement of Changes in Owners Equity
SECTION 9.2

• Statement of Changes in Owners Equity for an
  Ongoing Business
• The statement of changes in owners equity for an
  ongoing business with a net loss can look like
  this