9E: Financial Statements

• Income Statement

  • Contains the income and expense accounts
  • Shows the result of the business operation or the performance of the business
• Balance Sheet

  • Contains the assets, liabilities, and capital of the business
  • It shows the financial condition of the business.
• If income exceeds expenses, there is a profit (NET INCOME). If income is less than expenses, there is a loss (NET LOSS).
• If you get NET INCOME in the Income Statement, you must ADD the profit to the TOTAL CAPITAL. If you get NET LOSS, however, you must SUBTRACT the loss to the total capital.