Smith Company: Income Statement And Profitabilty

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Smith Company Income Statement For the Year Ended 31st December 2012 Revenues $370,500 Less: COGS ($279,000) $91,500 Less: Expenses Depreciation Expense $24,350 Insurance $1,400 Marketing $4,500 Property Taxes $8,900 Rent $18,000 Salaries $67,500 Utilities $6,700 ($131,850) Profit/Loss for the period ($39,850) Add: Retained earnings bal. b/f $29550 ($10,300) Adjustments Total revenue calculation Revenue $406,000 Less: Purchase ($35,500) 1.Total Revenue $370,500 2.C.O.G.S calculation Cost of goods sold $254,000 Add back: Closing stock $25,000 $279,000 3.Computation: Retained earnings bal. b/f Dr. Total $747,550 Less: Cr. Total $718,000 $29,550 How the Income/Loss Compares to the Original Income Statement Original income statement value $29,550 Current year's loss $10,300 Smith Company has therefore registered a decline in profitability during the current year. The Matching Concept: Its Relevance The field of accounting is governed by quite a number of concepts and rules. Some of these rules and concepts include but they are not in any way limited to the revenue recognition principle, the matching concept and the going concern principle. In this section, I will concern myself with the matching concept and its relevance. It is important to note from the onset that profit generation remains one of the key aims of a business entity. In that regard, most business entities routinely match costs to revenue so as to ascertain the profit

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