Homework

Revise Ch 8+9
Prepare Ch 10
 Chapter 9

Income & Expenses

 Outcomes
 define and discuss the following concepts:
◦ sales,
◦ cost of sales,
◦ income, and
◦ expenses;
 identify the relevant source documents
 record the transactions in the general journal;
 post the journal entries to the general ledger
 prepare the abbreviated trial balance
 identify the relevant accounts in the financial
statements
 Income
 earned when goods/services are rendered
 2 types of businesses:
◦ service, eg. attorneys and accountants  services
rendered/commission received
◦ trade, eg. clothing retailer  sales
 other examples not connected to main activity:
◦ interest income
◦ rent income
 Income
 income is:
◦ inflow of economic benefits
◦ during a financial period
◦ which leads to an increase in equity (owner’s interest)
◦ as a result of an increase in assets
◦ excluding contributions by owners
 Income
 examples:

◦ services rendered
◦ sales (of goods)
◦ rent received
◦ interest received
◦ commission received
 Expenses
 incurred when goods/services are purchased
 examples:

◦ telephone
◦ electricity
◦ wages
◦ salaries
◦ Stationery
 trade entities  cost of sales (separately in SCI)
 Expenses
 calculation of cost of sales (ch 3):

Opening inventory
+ Net purchases (total purchases - returns)
+ Freight on purchases/Customs duty/ Import duty
= Available for sale
- Closing inventory
= Cost of sales
 Expenses
 expenses are:
◦ outflow of economic benefits
◦ during a financial period
◦ that leads to a decrease in equity
◦ as a result of a decrease in assets or an increase in
liabilities
◦ excluding withdrawals by owners
Example 9.1
Textbook
Practical eg
Textbook