1. INCOME STATEMENTS Ag Business Management Spring 1999 Original PowerPoint Created by Mike White Modified by Georgia Agricultural Education Curriculum Office June, 2002

2. How do you measure performance? b Your school work b Basketball team b Restaurant b Greenhouse

3. Objectives b Describe the importance of income statements. b Identify sources of revenue and expenses. b Given a list of transactions, categorize revenues and expenses.

4. Importance of an Income Statement b Did the business end the year with a profit or loss? b How much was the profit/loss?

5. Uses of Income Statement b b Summarize revenues & expenses b b Determine profit/loss b b Explain changes in owner equity

6. Uses of Income Statement b b Calculate financial measures b b Support loan application

7. Summary of Revenue & Expenses b b Revenue = cash receipts from product sales or dividends on interest income. Short or long term asset sales Inventory adjustments

8. Examples of Revenues b Cash Revenues Cash salesCash sales Government paymentsGovernment payments Custom work receiptsCustom work receipts

9. Examples of Revenues b Non-cash Revenues Acct. ReceivableAcct. Receivable Changes in inventoryChanges in inventory

10. Summary of Revenue & Expenses b b Expenses operating interest non-cash expense adjustment

11. Examples of Expenses b b Cash operating seed fertilizer chemicals

12. Examples of Expenses b b Non-cash expenses depreciation changes in unused supp., acct. pay., accrued int., accrued taxes

13. Net Income b b Net income = revenue - expenses Net income calculated annually Corresponds with income tax reporting dates

14. Cash Accounting - Income St. cash revenue - cash expenses = net cash income = net cash income

15. Cash Accounting - Income St. net cash income - depreciation = net income from operations

16. Cash Accounting - Income St. net income from operation  gain/loss on sale of capital assets = net income

17. Accrual Accounting Income Statement gross revenue - cash expenses - depreciation  non-cash expense adjustment = net income from operation

18. Accrual Accounting Income Statement net income from operations   gain/loss on sale of capital assets = net income