Chapter

14.5. The Income Statement*

From IntroductionToBusiness OP 8D04gAa

Concepts

1. How is owners’ equity determined?

   "Owners’ equity is the owners’ total investment in the business after all liabilities have been paid. For sole proprietorships and partnerships, amounts put in by the owners are recorded as capital. I

2. How does the income statement report a firm’s profitability?

   "The balance sheet shows the firm’s financial position at a certain point in time. The income statement summarizes the firm’s revenues and expenses and shows its total profit or loss over a period of

3. How are revenues calculated on an income statement?

   "Revenues are the dollar amount of sales plus any other income received from sources such as interest, dividends, and rents. The revenues of Delicious Desserts arise from sales of its bakery products.

4. What expenses are reported on an income statement?

   "Expenses are the costs of generating revenues. Two types are recorded on the income statement: cost of goods sold and operating expenses. The cost of goods sold is the total expense of buying or prod