how will the business generate earnings and what might its expenses be? revenue ◦ earnings from a...

How will the business generate earnings and what might its expenses be?

RevenueRevenue◦ Earnings from a business’s activities

ExpensesExpenses◦ Outgoing payment made by a business or individual required to operate

a business Income and Expense Summary Account

◦ Used at the end of the accounting cycle to post the Closing Entries and to close the temporary accounts in preparation for the next accounting period.

Revenue’s and Expenses are summarized in the Income StatementIncome Statement A financial statement that contains Revenue & Expense information for

a designated period of time.

Anticipate Revenues & Expenses for the business.◦ What are some examples of different revenues and expenses?◦ Brainstorm time!

The Chart of AccountsChart of Accounts◦ A listing of all accounts a business needs◦ Categorized by Assets, Liabilities, Owner’s Equity, Revenue,

and Expenses (example on next slide).

Typically each category has multiple accounts◦ Each category uses a designated set of number ranges for

individual accounts Assets (100), Liabilities (200), Owners Equity (300), Revenues

(400), & Expenses (500) These number ranges may change based on the needs of the

business.

◦ Each account is assigned a number

Assign appropriate account numbers to each identified account◦ Assets (100), Liabilities (200), Owners Equity (300), Revenues

(400), & Expenses (500) Create a Chart of Accounts based on the numbered

accounts◦ See the next slide for the accounts associated with the sample

case.

Assets101 Cash102 Office Equipment103 Supplies104 Office Furniture

Revenue401 Sales Revenue

Liabilities201 Accounts Payable/Computer’s Inc.

Expenses501 Rent Expense502 Supplies Expense503 Telephone Expense504 Electricity Expense

Owner’s Equity301 <Owner’s Name>, Capital302 <Owner’s Name>, Drawing310 Income Summary