Expanded Ledger  Income Statement: Revenue, Expenses Drawings

1. Expanded Ledger  Income Statement: Revenue, ExpensesDrawings REF CHAPTER 5, P. 118-124 Practice: p.124 exercises #1,2,4 p. 126 exercises #3,5 Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

2. When a company earns money  the equity section of the balance sheet _________ When a company pays expenses and / or the owner takes money out of the business for personal use  the equity section of the balance sheet __________. Revenue, Expenses & Drawings (dividends) Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

3. Revenue, Expenses & Drawings (dividends) REVENUES:  EXPENSES:  DRAWINGS (or DIVIDENDS if a corporation)  Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

4. Example: Burt’s Pigeon Clean-up Inc. cleaned the sidewalk in front of the school and invoiced the school $500.remember double entry accounting DR=CR • Revenue (making money) increases equity • Increases in equity are credit entries • Revenue accounts are credited Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

5. Expenses are things (costs) that the company has to pay for in order to make revenue. Expenses ________ equity. Examples of expenses: Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

6. Example: Burt’s Pigeon Clean-up Inc. cleaned the sidewalk in front of the school and invoiced the school $500. On payday, Burt paid Earnie and Elmo $100 each for their clean up of the school; the cost of cleaning material for the job was $75. • Expenses (spending money) _________ equity • Decreases in equity are _______ entries • Expense accounts are debited Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

7. Most businesses usually have one (sometimes a few) revenue accounts. All expense accounts will usually have a debit balance. All expense accounts will usually have a debit balance. Businesses have many different expense accounts. Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

8. NET INCOME (NET LOSS): • The difference between the revenues and the expenses for a time period represents the profit for the business. • Revenue – Expenses = Net Income or Profit • Revenue Expenses = Net Profit • Revenue Expenses = Net Loss Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

9. DRAWINGS An owner of a business is entitled to some of the profits of the company, thus may withdraw money from the company (like a salary or dividends if a corporation) on a regular basis. • Drawings ___________ equity • Decreases in equity are debit entries • Drawings accounts are _______ • However, drawings are ____________ because they have no bearing on the net income of the business (equity yes, profits no!) Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

10. Example: Bert withdraws $200 cash and $50 of cleaning supplies form his company for personal use. Expanded Ledger  Income Statement: Revenue, Expenses & Drawings

11. Sample Income Statement: Expanded Ledger  Income Statement: Revenue, Expenses & Drawings