Question

llustrate your understanding of how to use the adjusted trial balance to prepare an income statement by completing the following sentence.
In order to prepare an income statement using the account balances on an adjusted trial balance, all of the _______ (revenues / liabilities) and their credit balances are transferred to the income statement as well as all of the (expenses/assets) and their (debit/credit) balances.

Answer 1

Answer:

Revenue and all their credit balances are transferred to the income statement and all the expenses and their debit balances are included in the income statement.

Explanation:

Keep it simple. In the income statement comes the savings from the operations of the company which means

Savings (Profit) = Revenue - Expenses

So the revenue credit balances and expenses debit balances must be reported in the income statement.

Answer 2

Answer:

The correct word for the blank spaces are (in that order): revenues; expenses; debit.

Explanation:

The Income Statement is a report that measures the financial performance of a company over a given period. The Income Statement shows the company's revenues (credit balances), expenses (debit balance), and net profit (credit balance) from both operating and non-operating activities.