posted by Dan
I have to prepare a income statement with the following info. I don't understand it.
Accounts Receivable 14,000
office supplies 3,250
office equipment 18,000
accounts payable 8,500
owner investments 84,000
cash withdrawals by owner 2,000
consulting fees earned 14,000
rent expense 3,550
salaries expenses 7,000
telephone expense 760
misc. expenses 580
Any help would be appreciated. I just need to see it done one time so I can catch on.
Dan, I think for this question you only need to use the fees earned and the expenses to determine net income.
As I recall the formula is
Revenues - Expenses = Net Income
The only revenue entry I see is the fees earned. You need to add up the expenses and subtract them from the fees. T think the form looks something like this:
Fees earned xxxx
list each expense
Subtotal each section and subtract expenses from revunues
Net Income = difference of the two subtotals
All of the other entries look like balance sheet accounts to me.
The withdrawals by owner would appear on a statement called change in owner's equity.
Your book should have examples of each of these statements and how to prepare them.
I was getting mixed up on what revenues were. I had it all mixed up. I was thinking that cash was a revenue.
I should also mention to be sure and have a title on the document that states clearly what it is and a date to tell what time period the statement is for, quartely or annual.
Cash is a permanent account on the balance sheet. For the income statement we're only interested in the temporary accounts.
Would cash be considered owners equity or would just owners investments be considered equity?
Cash is not owner's equity. It's a permanent asset account. The owner's equity or capital account, or in this case I think owner investments, is the owner's equity.