Lesson:
16Topic: Formal financial statements (the Income Statement)
Objectives:
By the end of this class, the students will come to understand the process involved in creating a formal
Income Statement.
| Inner Circle Internet Solutions | ||
| Income Statement | ||
| For the Month Ended September 30, 2002 | ||
| Revenues | ||
| Dial Up Service Fees Earned | $ 7,000.00 | |
| Domain Hosting Fees Earned | 3,200.00 | |
| Web Design Fees Earned |
1,800.00 |
|
|
Total Revenue |
$ 12,000.00 | |
| Expenses | ||
| Insurance Expense | $ 200.00 | |
| Office Rent | 1,400.00 | |
| T1 Line Expense | 2,400.00 | |
| Phone Expense | 150.00 | |
| Hydro Expense | 350.00 | |
| Wages Expense | 2,700.00 | |
| Supplies Expense | 75.00 | |
| Interest Expense |
25.00 |
|
|
Total Expenses |
7,300.00 |
|
| Net Income |
$ 4,700.00 |
|
The class will examine the following concepts related to the Income Statement in detail:
Finally, the student should understand the following concepts related to the Income Statement:
Method of Instruction and Evaluation:
After a Socratic lecture on the above topics, students will complete Exercise 2, page #134 within the course text. While students can complete this exercise within the workbook, they are encouraged to use the Excel Spreadsheet Package provided with this lesson plan.
Expectations Addressed:
The "Fundamental Accounting Practices" strand of the BAF3M Ministry of Education Curriculum Guidelines outlines all of the following specific expectations. The expectations addressed by this lesson have been highlighted below.
Introduction to Accounting as a Discipline:
explain the purpose of accounting;
explain the difference between accounting and bookkeeping;
identify the users and uses of accounting;
identify the Generally Accepted Accounting Principles (GAAP) and explain their importance.
Business Structures:
describe the characteristics of different forms of business organization, including sole proprietorship, partnership, and corporation;
describe the advantages and disadvantages of different forms of business organization, including sole proprietorship, partnership, and corporation;
explain the differences among the equity sections of different forms of business organization, including sole proprietorship, partnership, and corporation (e.g., capital account in a sole proprietorship versus common stock in shareholders’ equity in a corporation).
The Accounting Cycle for a Service Business:
assess the effects that transactions have on the accounts and financial statements of a service business;
record transactions using the journals and ledgers of a service business;
prepare a trial balance and the financial statements for a service business;
record adjusting and closing entries for a service business (e.g., prepaid expenses, amortization, accruals);
describe the impact of year-end procedures, including adjusting and closing entries, on the financial statements of a service business;
apply the Generally Accepted Accounting Principles (GAAP) at each stage of the accounting cycle for a service business.
References: