2. RevenueExpensesProfit

3.  Profit  Profit is the increase in the owner’s equity that results from the successful operation of a business  Revenue  Revenue is amounts earned from the sale of goods and services during the routine operation of the business  Expenses  Expenses are the cost of items or services used up in the routine operation of the business

4. Revenue$500Expenses$400 Net Income $100  Net income  Net income is the difference between revenue and expenses when revenue is greater than expenses

5. Revenue$500Expenses$550 Net Loss $(50)  Net income  Net income is the difference between revenue and expenses when revenue is greater than expenses

6. income statement accounting period The income statement presents the revenue, expenses, and net income/loss for a specific period of time; called an accounting period

7. Step One: Prepare Statement Heading Line One: Who? Line Two: What? Line Three: When?

8. Step Two: Prepare Revenue Section  The largest revenue item is usually listed first  The total is placed in the right column

9. Step Three: Prepare Expenses Section  Listed in the order they appear in the ledger  The total is also placed in the right column

10. Step Four: Determine Net Income or Net Loss  Double lines are ruled below the net income or net loss