Accounting1 Chapter 5 (The Income Statement)

Income Statement

Shows if a business made a profit or loss and if it's profitable. As well as the expense/Revenue details

Revenue

An increase in equity

Expenses

The cost associated with producing revenue

Drawings

A decrease in equity (usually bank)

Capital

The sum of the equity figure from the beginning of the fiscal period plus the owner's capital

Time period concept

Companies must use fiscal periods of equal length when making financial progress

The matching principal

Expenses must be recorded in the period in which the revenue is recognized