Journal Entries For Income Statement

Income tax 25 25 million 0 25 6 250 000 this 6 25 million is the company s expense for the period which also results in a company s obligation to the government.

Journal entries for income statement. Example journal entries. It reports figures for any adjustment to opening retained earnings net income or net loss for the period and cash dividends or stock dividends i e. In the following examples we assume that the employee s tax rate for social security is 6 2 and that the employer s tax rate is 6 2. The income statement and the balance sheet are very important financial statements.

Let s assume our company also has salaried employees who are paid semimonthly on the 15th and the last day of each month. The payment regarding those services will be treated as accrued income. Accrued income journal entries. For example when the company spends cash to purchase a new vehicle the cash account is decreased or credited and the vehicle account is increased or debited.

It is current assets for any business and has an impact on a balance sheet and profit loss a c. As business events occur throughout the accounting period journal entries are recorded in the general journal to show how the event changed in the accounting equation. Examples of payroll journal entries for salaries. The first journal entry above would affect the income statement where we need to pass the entry of the bad debt and also for the allowance for doubtful debts account.

What they really mean. Retained earnings as at 1 january 2014 were 20 million. Management should use the income and expense statement to identify whether the business has a net income for the period. Journal entry in the income account.

For this an accountant needs to pass the journal entry that debits accrued income a c and credit income a c. The important figure is the final line net income. No journal entry for net income it is the difference between total expenses and total revenue and it is the balancing figure. If you are having any difficulty understanding this example of income return to our earlier lesson called define income where we go over in detail what income is and how it fits in with the accounting equation.

It should also use it to establish relationships between expenses and revenue to spot trends in operating income ratios and for comparison of actual results against a budget.