To prepare an income statement.
To identify the parts of an income
statement
To identify where there is a profit or loss
for a business.
is a structured financial statement that presents the
income, expenses, and net income or net loss
realized during a certain period.
Accounting concept in the preparation of income
statement.
Accrual Concept = the revenues and expenses are
recorded at the time they are incurred and not when
they are received or paid.
Ex. the business sold a product on credit amounting
to P50,000 to its customer.
Account Receivable P50,000
Sales P50,000
The value received is the right to collect from the
customer in the form of receivable, while the value
parted is represented by the products given to the
customer.
1. Heading – contains the information on the name of the business, the
name of the financial statement, and the date.
2. Body – is composed of the revenue, expenses, and net income or net loss
of the business during a given period.
In the computation of net income or loss during the
period, the income statement consists of the
following major sections
1.Income or Revenue section
2. Cost of Goods Sold section
3. Operating Expense section
1. Sales
2. Sales Returns and Allowances
3. Sales Discount
Cost of Goods Sold or Cost of Sale
= represents the amount of cost in selling the
product or providing the service.
- buys and sells goods or product without
changing the appearance of the goods.
The cost of goods sold in merchandising is
composed of merchandise inventory, purchases,
and related accounts.
Merchandising Inventory, beginning XXXX
Add: Net Purchases
Purchases XXXX
Freight-in XXXX
Total XXXX
Less: Purchase Returns XXXX
Purchase Discounts XXXX XXXXXXXX
Total Goods Available for Sale XXXX
Merchandising Inventory, Ending XXXX
Cost of Goods Sold or Cost of Sales XXXX
====
Cost of Service
Direct Labor (Salaries and Wages) XXXX
Add: Materials or Supplies used XXXX
Factory Overhead XXXX
XXXX
Cost of Services XXXX
====
Raw Materials, Beginning XXXX
Add: Raw materials purchases XXXX
Freight-in XXXX
Total XXXX
Less: Purchase Returns XXXX
Purchase Discounts XXXX XXXX XXXX
Total Raw Materials available for use XXXX
Less: Raw Materials Ending XXXX
Raw Materials used XXXX
Add: Direct Labor XXXX
Factory Overhead XXXX XXXX
Total Manufacturing Cost XXXX
Add: Work in Process, beginning XXXX
Cost of Goods in Process XXXX
Less: Work in Process, Ending XXXX
Cost of Goods Manufactured XXXX
Add: Finished Goods, beginning XXXX
Total Goods Available for Sale XXXX
Less: Finished Goods Ending XXXX
Cost of Goods Sold XXXX
=====
- refers to goods that remain unsold or
unconsumed at the end of the accounting period.
In merchandising business the account title used
to describe the inventory Merchandise Inventory.
But in Manufacturing Business there are three
types of inventory used.
Raw Materials Inventory- these are raw
materials that were not used or consumed on
December 31.
Work-in-process inventory –these are raw
materials that have been started but remained
unfinished on December 31.
Finished Goods Inventory- these are goods that
have been completed but remained unsold on
December 31.
Modern Laundry Center
Trial Balance
December 31, 2020
Cash P 66,000
Account Receivable 80,000
Notes Receivable 20,000
Laundry Equipment 48,000
Office Furniture 28,000
Accounts Payable P38,000
Toledo, Capital 68,000
Laundry Service Income 175,300
Laundry Supplies Expense 11,800
Rent Expense 3,000
Salaries and Wages 16,000
Utilities Expense 3,500
Taxes and Licenses 5,000_______
Total P281,300 P281,300
======= =======
Modern Laundry Center
Income Statement
For the Period Ended December 31, 2020
Laundry Service Income P175,300
Less: Cost of Laundry Service
Direct Labor-Salaries and Wages P 16,000
Laundry Supplies 11,800
Utilities Expense 3,500 31,300
Gross Profit P144,000
Less: Operating Expenses
Rent expense P 3,000
Taxes and Licenses 5,000 8,000
Net Income P136,000
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