In this time of financial uncertainty where most businesses are being handled by accountants, knowing how to prepare even the basic financial statements is an added advantage. The principal financial statements are the Income Statement, Balance Sheet, Statement of Owner’s Equity and Statement of Cash Flows.
In relation to Income Statement, this is prepared to arrive at the net income or net loss. The Income Statement shows the results of operations for a given time period. The data may be presented either in single-step form or multi-step form.
SAMPLE OF SINGLE-STEP FORM
Xandra Company, Inc.
For the Year Ended, December 31, 2008
Net Sales $ XXX Income from Interest XXX Income from Dividends XXX ——-
Total Revenues $ XXX
Cost of Sales $ XXX
Expenses related to sales XXX
Administrative and other expenses XXX
Expenses related to interest XXX
Taxes paid XXX
Total expenses XXX
Net income After Income Taxes $ XXX
Due to the simplicity in presentation, anybody can prepare this even if there is no prior accounting background. The disagreement in the use of single-step form is the fact that the form does not clearly show the relationship of certain income from expenses.
Revenues and expenses are gathered and added together. The difference of the revenues versus the expenses is the net income or loss. Thus, in the next filing period of your income tax, you can compare this method of computation with your income statement previously filed. Any doubts in terms of what to add or deduct should be referred to the accountant to get the proper advice.