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Please give me an example of an estimated income statement, a scenario, the instruction, and the income statement.  So I can see step by step how this is calculated and done.. Liz C

Question

Please give me an example of an estimated income statement, a scenario, the instruction, and the income statement.  So I can see step by step how this is calculated and done.. 

Liz C

 

 

check_circleAnswer
Step 1

Income Statement is a financial statement which computes the net profits/Losses earned/incurred by the company during a particular period. It contains the revenues and expenses of the computing period and ascertains the Net Profit/Net Loss for the period.

Step 2

The steps to prepare an Income Statement are given below:

(a)   Ascertain the reporting period for which income statement has to be prepared. Usually, it is prepared for the financial period of 12 months, it can also be prepared quarterly or half-yearly.

(b)   The accounting records of the reporting period shall be collected, and a Trial Balance shall be prepared. The balances of every account i.e. Asset, Liability, Equity/Capital , Incomes, Expenses are summarized as the Trial Balance. A trial balance would appear  below.

(c)   Assets and Expense will have a Debit balance and Liabilities, capital and revenue will have Credit Balance.

(d)   The values of Incomes and expense will appear in the Income Statement and Assets, liabilities and capital in the Balance.

 

Step 3

Example: Trial ...

000
Trial Balance
Credit
Particulars
Debit
Cash
50
Accounts Receivable
50
Inventory
Investments
Equipment
Accumulated
25
10
55
Depreciation
Capital
Accounts Payable
Long-Term Liabilities
25
50
20
40
Revenue
100
Operating Expenses
Depreciation
Interest Expense
20
10
15
235
235
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000 Trial Balance Credit Particulars Debit Cash 50 Accounts Receivable 50 Inventory Investments Equipment Accumulated 25 10 55 Depreciation Capital Accounts Payable Long-Term Liabilities 25 50 20 40 Revenue 100 Operating Expenses Depreciation Interest Expense 20 10 15 235 235

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