Accounting: Preparing the Income Statement

Net income increases or decreases owner's equity?

increases

Time Period Principle

requires the definition and use of the same period of time for the accounting period

How are debit and credit balance sheet accounts determined by?

they balance each other

If the revenue is $24 500 and the expense are $28 000 what is the net loss?

$3500

If the revenue is $24 500 and the expense are $18 000 what is the net income?

$6500

Revenue

An inflow of assets from customers, earned from the sales of goods or services

Fiscal Period

Another term for accounting period

Revenue accounts increase equity and revenue earned is recored in what account?

Credit in the revenue account

Expenses decreed quite and money spent on expense is recored in what account?

Debit int he expense account

Matching Principle

Expense should be recorded and matched with revenue generated during the same accounting period

Accrual Basis of Accounting

Requires that revenues be recored when earned and expense when incurred

Cash Basis of Accounting

Requites that expense be recored only when they are paid for and the revenue be recored only when cash is received

Expenses

The cost of goods and services used by a company to bring in revenue

Income Statement

The name of the statement that prevents the revenue, expense, and net income (or net loss)

Accounting Period

The period of time covered by the financial statements

Balance Sheet

The statement hat presents the assets, liabilities , and owner's equity

Calendar Year

The twelfth month period from January 1 to December 31

Net Loss

When expenses are greater than revenues

Net Income

When revenue is grater than expenses

What are liabilities and capital increase on?

credit side

Which side does an asset decrease on?

credit side

What are liabilities and capital decrease on?

debit side

Which side does an asset increase on?

debit side

Net loss increases or decreases owner's equity?

decreases