I have 2 questions.
1. I am not sure if I am calculating the "net income" and "earnings before taxes" (EBT) correctly.
Are the numbers suppose to match? Please explain how to calculate the two given the below Income Statement.
Net Income = Revenue - Expenses
EBT = Revenue - (Expenses - taxes)
2. How do I create closing entries for the expenses to set them to zero for the next accounting cycle.
My understanding is a T-account needs to be created for the expenses and adjustments made so the Dr and Cr balance to 0.
|Retained Earning||$ 1,745,670.41|
|Wage Tax expense||$57,829.08|
|Medical Insurance Expense||$32,400.00|
|Auto Insurance Expense||$4,140.00|
|Electrical & Gas Service Expense||$6,736.80|
|Liability Insurance Expense||$14,805.20|
|Cell Phone Service Expense||$3,660.00|
|Professional Services Expense||$8,437.50|
|Office supplies expense||$30,196.00|
|Dry Cleaning Expense||$1,703.75|
|Storefront Paper Supplies Expense||$3,374.25|
|Waste Serices Expense||$600.00|
|Car Maintenance and Fuel Expense||$3,956.40|
|Soda Machine Repair and CO2 Expense||$4,728.00|
|Credit Card Expense||$3,714.30|
|Cooking Supplies Expense||$47,745.00|
|Depreciation Expense: Equipment||$16,608.00|
|Depreciation Expense: Plant & Property||$13,200.00|
|Close Expenses to Income Summary|
|Retained Earnings||$ 13,125.00|
|Close Divends to Retained Earnings|
|Acct #s||Annual FS 2021|
|4100||Sales Revenue: Corporate Accounts||$1,400,353.41|
|4101||Sales Revenues: Storefront||$345,317.00|
|Total Sales Revenue||$1,745,670.41|
|5000||Cost of Goods Sold:Ingredients||$264,716.87|
|5010||Cost of Goods Sold: Boxes and Cupcake cups||$15,389.90|
|5020||Cost of Goods Sold: Beverages||$23,081.20|
|Gross Profit Plus Interest Revenue||$1,442,788.44|
|6201-6205||Wage Tax expense||$57,829.08|
|7001||Medical Insurance Expense||$32,400.00|
|7002||Auto Insurance Expense||$4,140.00|
|7004||Electrical & Gas Service Expense||$6,736.80|
|7005||Liability Insurance Expense||$14,805.20|
|7007||Cell Phone Service Expense||$3,660.00|
|7011||Professional Services Expense||$8,437.50|
|7013||Office supplies expense||$30,196.00|
|7014||Dry Cleaning Expense||$1,703.75|
|7015||Storefront Paper Supplies Expense||$3,374.25|
|7017||Waste Serices Expense||$600.00|
|7018||Car Maintenance and Fuel Expense||$3,956.40|
|7021||Soda Machine Repair and CO2 Expense||$4,728.00|
|7022||Credit Card Expense||$3,714.30|
|7023||Cooking Supplies Expense||$47,745.00|
|Selling and Admin Expenses||$1,137,250.20|
|8000||Depreciation Expense: Equipment||$16,608.00|
|8010||Depreciation Expense: Plant & Property||$13,200.00|
|Total Depreciation Expense|
|Earnings before Taxes||$275,730.24||diff|
|6207||Corporate Income Tax Expense||$93,746.98|
|Earnings per share|
|Statement of Change in Owner's Equity|
|Beginning Common Stock (par $1)||$50,000.00|
|Plus: Common Stock Issued||$0.00|
|Ending Common Stock||$170,075.91|
|Beginning Retained Earnings||$402,066.22|
|Plus Net income||$275,730.24|
|3300||Less: Dividends Paid||$13,125.00|
|Ending Retained Earnings||$664,671.46|
Earnings before tax (EBT) and net income are computed as explained below:
Earnings before taxes are computed by deducting operating expenses, selling and administrative expenses from total revenues.
Net income is computed by deducting taxes from earnings before tax. If taxes are zero, then earnings before taxes and net income are same.
Prepare income Statement with EBT and net income as shown below:
Continuation of income state...
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