Question

Please Write Handwritten on the page

On your own words, explain the purpose and the importance of the income statement, and prepare the income statement for ABC company based on the following information taken from the trial balance in 2019

Consulting revenue		SAR70,000
Rental revenue		30,000
Supplies expense	5,000
Rent expense	20,000
Wages expense	30,000

Answer 1

Answer :-

Purpose of the Income statement :-

The income statement showing the net income or loss over a specified period. It list the total revenues and expenses that occurred over the period, leading to a total calculation of how much money was ultimately gained or lossed.

Importance of the Income statement :-

The income statement is important financial statement as it shows the overall profitability of a company. You can also use the income statement to analyse how efficiently your business is able to translate expense into revenues.

Income statement of ABC company :-

Income :-

Add:- Consulting revenue. = 70000

Add:-. Rental revenue. = 30000

Gross income = 100000

Expense:-

Less:- Supplies Expenses. = 5000

Less:- Rent Expenses = 20000

Less:-. Wages Expense = 30000

NET Income/Expense. = 45000