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Financial Statements

What is the purpose of an income summary account?

What accounts appear on the income statement?

What accounts appear on the statement of retained earnings?

What accounts appear on the balance sheet?

What is the difference between a classified and unclassified balance sheet?

Solution Preview

Please refer to response attached, which is also presented below. I hope this helps and take care.

RESPONSE:

Financial Statements

The four financial statements are the Income Statement, Statement of Owner Equity or Statement of Retain Earnings, Balance Sheet, and the Cash Flow Statement.

1. What is the purpose of an income summary account?

The Income Summary account is the account in the general ledger used to summarize the revenue and expenses for the fiscal period. In other words, the purpose is to provide a summary of the revenues and expenses for a fiscal period.

2. What accounts appear on the Income Statement?

Income statement is a report of the net income or net loss for a fiscal period; sometimes called a "profit and loss" statement.

In other words, a company's income statement is a record of its earnings or losses for a given period. It shows all of the money a company earned (revenues) and all of the money a company spent (expenses) during this period, and the resulting net income (or loss). It also accounts for the effects of some basic accounting principles such as depreciation.

If revenues are ...

Solution Summary

This solution explains various sections of the financial statements. Specifically, it explains the purpose of an income summary account and the specific accounts appearing on the income statement, the statement of retained earnings, and the balance sheet, as well as the difference between a classified and unclassified balance sheet by example.

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