BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Revenues earned by a business
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Expenses incurred by a business
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Withdrawals
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Net income
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All of these answers are correct.
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Detailed explanation-1: -The change in the value of long-term assets or fixed assets such as land, building, and equipment is not recorded in the income statement as these assets are used for more than one year and are important for operations.
Detailed explanation-2: -Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
Detailed explanation-3: -Unearned fees and prepaid expenses are not classified as costs of the period, and therefore, do not appear in the income statement. The net loss appears in the income statement and it shows the amount by which the company’s costs exceed its revenues.
Detailed explanation-4: -The income statement presents revenue, expenses, and net income. The components of the income statement include: revenue; cost of sales; sales, general, and administrative expenses; other operating expenses; non-operating income and expenses; gains and losses; non-recurring items; net income; and EPS.