BSB110 Lecture Notes - Income Statement, Cash Flow, Net Profit
Document Summary
Expenses reduce net profit and owners equity. Income statements tell us how well a business is doing for a specific period. Balance sheets tell us how well a business is doing at a specific date (as at ) To do an income statement you will need revenue and expenses. Increases to amounts are recorded on the same side as the nature of the account. Decreases to amounts are recorded on the opposite side as the nature of the account. An entry has to effect at least two sides of the ledger. Net profit is made up of revenue and expenses. Pre-paid things (insurance, rent etc) are assets not expenses. If someone pays in advance this is a liability because we can"t call it revenue until the service is performed. Dr depreciation expense - name of asset. Cr accumulated depreciation - name of asset. Accrued revenues eg interest on term deposit. Unearned revenues eg fees received in advance for services.
