The “Accounting Equation” was the first PhxKlips. The ALOE equation was the crux of this PhxKlips. This equation is summarized as: Assets = Liabilities + Owner’s Equity. It is the foundation for all accounting tasks and principles. The use of ALOE is a means for easy recall of the equation. “Debits and Credits” was the second PhxKlips. This PhxKlips delineated when to use debits and when to use credits in relation to the posting of income and expenses. Expenses are recorded as debits on the left side of a T account and income ...view middle of the document...
The four statements are the Income Statement, the Balance Sheet, the Retained Earnings Statement and the Statement of Cash Flow. Together they provide a complete picture of the financial condition of a company. This PhxKlips details how to compile and read each of the four types of statements so that I could make sense out of the information provided on each one. The Income Statement contains the revenue and expenses with the resulting net income or loss for a specific period. The Balance Sheet shows the company’s total assets, liabilities and owner’s equity on a specific date. The Retained Earnings Statement contains the record of net income or loss that the company has shown. The Statement of Cash Flow details all revenues and expenses made during a specific period. “Income Statements” was the last PhxKlips. This tutorial explained the two approaches to gross profit expression. These approaches are single step and multi-step. Single step is
straightforward and yields the net income figure.
The multi-step approach organizes the
financial data in a format that makes it simpler to perform ratio analyses, such as the gross profit percentage ratio. Each approach has its own benefits and shortcomings.