Preparing the Basic Income Statement and Statement of Retained Earnings

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School
Eastern Gateway Community College **We aren't endorsed by this school
Course
ACCOUNTING 103
Subject
Accounting
Date
Nov 13, 2023
Pages
3
Uploaded by EarlIce12257 on coursehero.com
Certainly! Let's walk through the preparation of the basic income statement and statement of retained earnings. We'll use a simplified format for illustration: 1. Basic Income Statement: The income statement summarizes the revenues, expenses, and profits or losses incurred by a company over a specific period. The basic format is as follows: [Company Name] Income Statement For the Year Ended [Date] Revenue - Cost of Goods Sold ________________________ Gross Profit Operating Expenses: - Selling Expenses - General and Administrative Expenses ________________________ Operating Income Other Income and Expenses: - Interest Income - Interest Expense - Other Gains and Losses ________________________ Income Before Tax Income Tax Expense ________________________ Net Income XYZ Corporation Income Statement For the Year Ended December 31, 20XX Revenue $500,000 - Cost of Goods Sold $200,000 ________________________ Gross Profit $300,000
Operating Expenses: - Selling Expenses $50,000 - Admin Expenses $100,000 ________________________ Operating Income $150,000 Other Income and Expenses: - Interest Income $5,000 - Interest Expense $10,000 - Other Gains $2,000 - Other Losses $1,000 ________________________ Income Before Tax $146,000 Income Tax Expense $40,000 ________________________ Net Income $106,000 Statement of Retained Earnings: The statement of retained earnings shows changes in retained earnings over a specific period, including net income, dividends, and any adjustments. The basic format is as follows: [Company Name] Statement of Retained Earnings For the Year Ended [Date] Retained Earnings, Beginning + Net Income - Dividends ________________________ Retained Earnings, Ending XYZ Corporation Statement of Retained Earnings For the Year Ended December 31, 20XX Retained Earnings, Beginning $250,000 + Net Income $106,000 - Dividends $30,000 ________________________
Retained Earnings, Ending $326,000 In this example, the statement shows that the retained earnings at the beginning of the year were $250,000. After accounting for net income of $106,000 and dividends of $30,000, the retained earnings at the end of the year are $326,000. The ending balance of retained earnings is carried forward to the next accounting period.
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