WEEK 2-FABM 2

WHAT I KNOW

Activity 1.1
A. Briefly discuss the following concepts in two to three sentences. For numbers 3-5, give at
least two account titles related to each.

1. Accrual-based accounting - Accrual accounting is a form of accounting in which income

and expenditures are recorded at the time of the transaction rather than when payment is

received or paid. It is considered the standard accounting practice for most companies

except for very small businesses and individuals.

2. Merchandising business- The promotion and sales of goods are referred to as

merchandising. It is most often associated with retail sales, in which companies offer

goods to customers. More specifically, merchandising may relate to the marketing,

promotion, and advertising of goods that are intended for retail sales.

3. Revenues-

● Sales.

● Rent revenue.

4. Expenses-

● Advertising Expense.

● Bank Fees.

5. Service business-

● Accounts receivable

● Merchandise inventory

Activity 1.2

B. Unscramble the letters in each number.

1. MECOIN TESTAMENT - INCOME STATEMENT

2. VERCISE INMECO - SERVICE INCOME

3. APRETIONDECIA EEXNEPS - DEPRECIATION EXPENSE

4. BUDFOULT STACCOUN EEXNEPS - DOUBTFUL ACCOUNTS EXPENSE

5. PITFRO DAN SOLS AMENTTEST - PROFIT AND LOSS STATEMENT

6. RESINTTE SPENEEX - INTEREST EXPENSE

7. SWAGE ESPENEX - WAGES EXPENSE

8. SCOT OF DOOGS OLDS - COST OF GOODS SOLD

9. ALESS COUNTSID - SALES DISCOUNT

10.CHASERUPS - PURCHASES

Test Your Understanding

1. What is a single-step income statement?

-A single-step income statement provides a quick overview of a business's revenue and

expenditures. The sales, expenditures, and bottom-line net income of a business are all

summarized in one simple form.

2. What is a multi-step income statement?

-A multi-step income statement is one in which total revenue and expenditures are split

into operational and non-operating categories. It categorizes things so that income

statement users may better comprehend the business's main activities.

3. What is the difference between a single-step income statement and a multistep income

statement?

-A single-step income statement offers a simple report of a business’s profit, using a

single equation to calculate net income. A multi-step income statement, on the other

hand, separates operational revenues and expenses from non-operational ones and

follows a three-step process to calculate net income.

What I Have Learned

The accounts that comprise the single-step income statements are Service income, Salaries

or Wages expense, Utilities expense, Insurance expense, Depreciation expense,

Uncollectible Accounts Expense/ Doubtful Accounts Expense/ Bad Debts Expense, and

Interest Expense.