By James Rosa
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Doc, printed on 12/05/97, at 11:56 AM. Last saved on 12/05/97 10:06 AM. The Income Statement 12-month accounting period. National Construction's fiscal year ends January 31. A company's owners want to know whether or not the company has a reasonable income so that they can decide whether or not to continue operating the company. Creditors also want to be sure that a company has a reasonable income before lending it money. National Construction Income Statement Feb 1, 1995 - Jan 31, 1996 Revenues Hauling Excavating Total Revenue $ 128,000 64,000 192,000 Expenses Operating Wages $ 36,000 Subcontracts 77,600 Gas and Oil 8,000 Maintenance 6,000 Total Operating 127,600 Administrative Interest – Mortgage 5,000 Interest – Bank Loan 2,500 Interest – Oper.
For instance, Brown knows that he owes some interest on his loans, but this has not been recorded yet because he hasn't received a statement from the bank. This interest expense should be recorded at the end of his current year, or the income calculated for the year will be larger than it should be, and smaller the next year when the interest expense is finally taken into account. If Brown had wanted accurate monthly income figures, he would have had to choose an accounting period of one month and would have had to adjust the financial statements at the end of every month.
Each statement has more accounts on it and the accounts are categorized by types. Because of this categorization of accounts they are called classified statements. The purpose of classified statements is to group accounts into sets that give similar information. The Balance Sheet The balance sheet categories include current and fixed assets, current and long-term liabilities, and equity. Assets Assets are all the physical things and other items of value owned by a company. They are listed on the left side of the balance sheet.
Simply Accounting by James Rosa