Dec
25
How To Compute Net Income And Net Loss?
By1. invested 10,000 cash to start the agency
2. paid 400 cash for april office rent
3. purchased office equipment for 2,500 cash
4. incurred 300 of advertising cost in chicago tribune, on account
5. paid 600 cash for office supplies
6. earned 9,500 for service rendered: 3,000 cash is received from customers, and the balance of 6,500 is billed to customers on account.
7. withdrew 200 cash for personal use
8. paid chicago tribune amount in transaction (4)
9. paid employees salaries 2,200
10. received 4,000 in cash for customers who have previously been billed in transaction (6)
1 Comments
December 25th, 2009 at 9:34 am
Brandie,
Are you asking me to do your accounting homework?
Anyway, the below numbered items are the only relevant transactions in calculating income or loss. And technically speaking, it is not “net” because net in accounting p&l statements means after taxes. I am also assuming you are on accrual basis, and not cash.
Here goes:
2 is an expense
4 is an expense (even though you haven’t paid for it yet)
5 is an expense (assuming you will likely use them up in less than a year)
6 the entire amount is revenue
9 is an expense
Add up 2, 4, 5, and 9, and subtract that from 6 to determine your answer. If positive, income. If negative, loss.
1 is a balance sheet entry (no effect on the income statement)
3 is assumed to be a balance sheet entry (trading the cash asset for equipment asset and am assuming no depreciation on the equipment)
7 is a balance sheet entry
8 is a balance sheet entry because we are assuming accrual basis, not cash basis
10 same answer as 8.