Income Statement and Balance Sheet
Income Statement and Balance Sheet
This is one of my documents with income statement and balance sheet. I received the score of 25/25. We are tasked to used multi-step format for the income statement.
Before that, our teacher already told us about these topics.
According to myaccountingcourse.com,
"Income Statement
- also called the profit and loss statement, is a report that shows the income, expenses, and resulting profits or losses of a company during a specific time period. The income statement is the first financial statement typically prepared during the accounting cycle because the net income or loss must be calculated and carried over to the statement of owner's equity before other financial statements can be prepared.
There are two income statement formats that are generally prepared.
Single-step income statement
– the single step statement only shows one category of income and one category of expenses. This format is less useful of external users because they can't calculate many efficiency and profitability ratios with this limited data.
"Multi-step income statement
– the multi-step statement separates expense accounts into more relevant and usable accounts based on their function. Cost of goods sold, operating and non-operating expenses are separated out and used to calculate gross profit, operating income, and net income.
In both income statement formats, revenues are always presented before expenses. Expenses can be listed alphabetically or by total dollar amount. Either presentation is acceptable.
Income statement expenses can also be formatted by the nature and the function of the expense."
According to accountingfocus.com,
"The Traditional (Absorption Costing) Income Statement
- uses absorption costing to create the income statement. This income statement looks at costs by dividing costs into product and period costs. In order to complete this statement correctly, make sure you understand product and period costs."
References:
The Traditional (Absorption Costing) Income Statement. Retrieved
from http://accountinginfocus.com/managerial-accounting-2/costing- methods/the-traditional-absorption-costing-income-statement/
Income Statement. Retrieved from
http://www.myaccountingcourse.com/financial-statements/income-
statement
THINGS I NEED TO REMEMBER WHEN DOING AN INCOME STATEMENT MULTI STEP FORMAT
1. See to it that the 8-column worksheet is accurate.
2. Write the heading. e.g.
3. When doing an income statement with the multi-step format, be sure that you memorized the arrangement of the account titles. e.g.
4. First, write the account titles. See if there’s any related accounts of sales and purchases, freights, operating expenses and other income.
5. Write the value with their respective account titles.
6. We can determine the net income if it’s a net profit or net loss by:
Net loss– when Gross Profit on Sales is less than the Operating Expenses
Net profit – when Gross Profit on Sales is greater than the Operating Expenses
THINGS I NEED TO REMEMBER WHEN DOING AN BALANCE SHEET
1. Write the heading. e.g.
2. Identify the current and non-current assets and liabilities, properties and equipment, owner’s equity and net income. e.g.
3. Write the account titles first.
4. Proceed with the writing of the value aligned with their account titles. e.g.
5. We will know if the assets, and liabilities and owner’s equity are balanced if their values are the same.
I chose this document because I didn’t encounter any error, so I didn’t repeat it and I am one of those who finished the task early. Also, I am proud of myself because I received a score of 25 out of 25.
P.S. I am the one who made the THINGS TO REMEMBER.
All the errors and mistakes I’ve encountered will always be part of my
experiences in this bookkeeping class. Those experiences will always
be brought and become learnings and those learnings will soon
become success.
Still confused on how to make the income statement in multi-step format, refer to this video on youtube:
Reference:
Prepare a Multiple Step Income Statement (Financial Accounting
Tutorial#32). Retrieved from https://www.youtube.com/watch?
v=YBWrDtBuRkA
