Income Statement: Financial Statements

TLE – 10 FUNDAMENTALS OF ACCOUNTING March 1 - 11, 2022 ST.
JAMES
19 FINANCIAL
STATEMENTS
Income statement
- refer to as profit and loss account is one of the financial statements of a
company and shows the company's revenues and expenses during a particular
period.
- They are nominal accounts that are closed at the end of each accounting year
also referred to as temporary accounts.
- Examples are revenues or income and expenses.
Balance Sheet
- refer to as a statement of net worth, or a statement of financial position.
- It displays the company’s total assets, and how these assets are financed,
through either debt or equity.
- The balance sheet is based on the fundamental equation:
Assets = Liabilities + Equity.
- They are real accounts that does not close at the end of the accounting year.
 the balances in the real accounts are carried over to become the beginning
balances of the next accounting period.
 Real accounts are also referred to as permanent accounts.
NAME: SCORE:
ACTIVITY 1: Identity what is being asked in the table. The first two examples are already given. (30 points)
ACCOUNTS ELEMENTS TO BE RECORDED IN

Rent Expenses Expense Income Statement
Prepaid Rent Asset Balance Sheet
1. Account Payable
2. Account Receivable
3. Salaries Payable
4. Salaries Expense
5. Unearned Income
6. Water Expense
7. Service Revenue
8. Utility payable
9. Utility Expense
10. Cash
11. Interest Income
12. Building
13. Sales
14. Mr. X, Capital
15. Note payable
ACTIVITY 2:
Instructions:
1. Put a checkmark on whether the account is nominal or real. (10 points)
2. Tell whether an Income Statement or a Balance sheet. ( 10 points)
ACCOUNT TITLES NOMINAL REAL FINANCIAL STATEMENT

Rent Expense √
1. Interest Income
2. Interest Expense
3. Mortgage Payable
4. Cash on hand
5. Note Receivable
6. Note Payable
7. Furniture & Fixtures
8. Supplies Expense
9. Service Revenue
10. Rent Income
PREPARATION OF INCOME STATEMENT

Example 1: Example 2:
XYZ Company XYZ Company

Income Statement Income Statement
For the month of January 2022 For the month of February 2022
Revenues: Revenues:
Sales 305,000 Sales 205,000
Interest Income 12,500 Interest Income 10,000
Service Revenue 20,000 337,500 Service Revenue 10,000 225,000
Less: Operating Expenses Less: Operating Expenses

Salaries Expense 103,000 Supplies Expense 60,000
Telephone Expense 3,350 Salaries Expense 120,000
Water Expense 6,500 Transportation Expense 20,000
Electricity Expense 10,000 Interest Expense 30,000
Supplies Expense 55,600 Light & Water Expense 25,000
Rent Expense 60,000 238,450 Taxes Expense 75,000 330,000
NET PROFIT P 99,050 NET LOSS P ( 105,000 )
 Note:
Net profit is an income earned by the business. It shows that the revenue or income is greater
than the expenses.
Net loss is a net operating loss of the business. It shows when the expenses exceed the income
or total revenue produced in a given period.
PREPARATION OF BALANCE SHEET STATEMENT
XYZ Company
Balance Sheet
For the month of February 2021
CURRENT ASSETS:
Cash 150,000
Notes Receivable 50,000
Less: Allowance for Bad debts 10,000 40,000
Merchandise Inventory 30,000
Office Supplies 20,000
Prepaid Rent 60,000
Total Current Assets 300,000
PROPERTY, PLANT AND EQUIPMENT:

Building 100,000
Less: Accumulated Depreciation- Building 20,000
Land 200,000
Machine Equipment 75,000
Less: Accum. Dep. – Machine Equip. 15,000 60,000
Computer Equipment 80,000
Total Property, Plant and Equipment 340,000
TOTAL ASSETS 640,000
LIABILITIES:
Account Payable 50,000
Note Payable 60,000
Salaries Payable 70,000
Interest Payable 80,000
Total Liabilities 260,000
OWNER’S EQUITY:
XYZ, Capital 410,000
Less: XYZ, Drawing 30,000 380,000
TOTAL LIABITILITIES AND CAPITAL 640,000
NOTE:
 The balance for total assets should be equal to the total of liabilities and capital.
 The balance is based on its fundamental equation: A = L + C
 Always apply the double rule ruling for your final answers.
ACTIVITY 2: APPLICATION:
Directions: These are the data of A’ Woods Company for the Month-end December 2020. As an
accountant of his business, you are required to create a single-step Income Statement and Balance Sheet
Statement on the given accounts.
Write your financial Report on one whole yellow paper.

Rent Expense – 12,000 Cash – 25,000 Advertising Expense –
4,475
Account Payable – 18,000 Utilities payable – 3,000 Interest Payable – 20,000
Bad Debts – 8,000 Accumulated Depreciation – Office Equipment - Sales Revenue - 48,000
35,000
Printing Expense – 6,025 Allowance for Bad Debts – 5,000 Store Equipment – 50,000
Account Receivables – Note Payable – 12,000 Supplies – 10,000

60,000
Office Equipment – 60,000 A, Capital – 175,000 Land – 50,000
Salaries Payable – 13,000 Water Expense – 2,500 Withdrawing – 26,000

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TLE – 10 FUNDAMENTALS OF ACCOUNTING March 1 - 11, 2022 ST.

ACCOUNTS ELEMENTS TO BE RECORDED IN

ACCOUNT TITLES NOMINAL REAL FINANCIAL STATEMENT

PREPARATION OF INCOME STATEMENT

XYZ Company XYZ Company

Less: Operating Expenses Less: Operating Expenses

NET PROFIT P 99,050 NET LOSS P ( 105,000 )

PREPARATION OF BALANCE SHEET STATEMENT

PROPERTY, PLANT AND EQUIPMENT:

TOTAL ASSETS 640,000

TOTAL LIABITILITIES AND CAPITAL 640,000

Write your financial Report on one whole yellow paper.

Account Receivables – Note Payable – 12,000 Supplies – 10,000

Salaries Payable – 13,000 Water Expense – 2,500 Withdrawing – 26,000

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