Financial Statements for a Sole Proprietorship CH. 9 Section 1 THE INCOME STATEMENT CH. 9 Section 1 THE INCOME STATEMENT.

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Presentation transcript:

Financial Statements for a Sole Proprietorship CH. 9 Section 1 THE INCOME STATEMENT CH. 9 Section 1 THE INCOME STATEMENT

Section 1The Income Statement Objectives:  Explain why financial statements are important for business decisions.  Describe the purpose of the income statement.  Prepare an income statement. Objectives:  Explain why financial statements are important for business decisions.  Describe the purpose of the income statement.  Prepare an income statement.

Preparing Financial Statements 7th Step in Accounting Cycle The primary financial statements prepared for a sole proprietorship: Income Statement Balance Sheet Statement of Changes in Owner’s Equity Preparing Financial Statements 7th Step in Accounting Cycle The primary financial statements prepared for a sole proprietorship: Income Statement Balance Sheet Statement of Changes in Owner’s Equity Section 1The Income Statement (cont'd.)

Financial Statements – prepared to summarize the changes resulting from business transactions. Income Statement – reports the net income or net loss for the period. Purpose – provide a report of the revenue earned and expenses incurred. Financial Statements – prepared to summarize the changes resulting from business transactions. Income Statement – reports the net income or net loss for the period. Purpose – provide a report of the revenue earned and expenses incurred. Section 1The Income Statement (cont'd.)

Wording of Date in Heading on Income Statement One Month – For the Month Ended…. One Quarter – For the Quarter Ended… One Year – For the Year Ended…. Wording of Date in Heading on Income Statement One Month – For the Month Ended…. One Quarter – For the Quarter Ended… One Year – For the Year Ended…. Section 1The Income Statement (cont'd.)

The Income Statement Revenue – Expenses = NI or NL Must follow exact format as shown: The Income Statement Revenue – Expenses = NI or NL Must follow exact format as shown: Section 1The Income Statement (cont'd.)

Complete Working Paper Problems: 9-1 Analyzing a Source Document p Preparing an Income Statement p Analyzing a Source Document p Preparing an Income Statement p.227 Section 1The Income Statement (cont'd.)