how to make income statement and balance sheet of it
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Answer:
we'll look at a handful of sample transactions, what the Trial Balance would look like, and then view the Income Statement and Balance Sheet.
Assets: items of value the company owns. Examples: machinery, cash.
Liabilities: money the company owes to others. Examples: vehicle loan, mortgage.
Equity: the portion of assets the company owns outright with no debt.
Revenue or Income: money earned from sales, plus dividends or interest on securities.
Expenses: items or services needed to run the business. Examples: rent, advertising.
The Income Statement, or Profit and Loss Report, is the easiest to understand. It lists only the income and expense accounts, and their balances. The Income Statement totals the debits and credits to determine Net Income Before Taxes. The Income Statement can be run at any time during the fiscal year to show a company's profitability. Net income before taxes is also referred to as earnings or profit.
Income and expense accounts are yearly or temporary accounts. At the beginning of the next fiscal year when Net Income is been posted to Retained Earnings, the income and expense accounts are "zeroed out" ... their balances reset to zero. Many accounting programs perform this tasks automatically.
The Balance Sheet is a financial snapshot of the business on any particular date. It is called the Balance Sheet because it reports on Asset, Liability, and Equity accounts, and is meant to show that these three accounts balance according to the accounting equation: Assets = Liabilities + Owner's Equity. When a Trial Balance proves that there are no errors, then the Balance Sheet will show that your total debits do equal your total credits.