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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Income statement items

Based on the data presented in Exercise 1-16, identify those items that would appear on the income statement.

To determine

Balance sheet:

This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity), over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Income statement:

The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

To Identify: the list of items that will appear in the income statement.

Explanation

The income statement of BA Services will show the following items:

  • Fees Earned
  • Supplies Expense
  • Utilities Expenses
  • Wages Expenses

The income statement of a company records the revenue earned and expenses made by the company over a given period of time; hence according to this the items are mentioned in the income statement.

  • Accounts receivable: Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
  • Cash: Cash is an asset; hence it is shown in the balance sheet.
  • Fees Earned: Fees earned is revenue; hence it is shown in the income statement.
  • Land: Land is an asset: hence it is shown in the balance sheet...

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