This document discusses income statements and their importance for measuring business performance. It defines revenue as cash receipts from product sales or interest income, and expenses as operating costs, interest, and non-cash adjustments. Income statements are used to determine if a business made a profit or loss for a given period, usually annually, and to explain changes in owner equity. They summarize revenues and expenses and can be used to calculate financial measures and support loan applications.

1. IN C O M E
S TA TE M E N TS
A g B u s in e s s
Ma na g e me nt
Original PowerPoint Created by
S p r i n g 19 9 9
Mike White
Modified by
Georgia Agricultural Education
Curriculum Office
June, 2002

2. How do you measure
performance?
a Your school work
a Basketball team
a Restaurant
a Greenhouse

3. Objectives
a Describe the importance of income
statements.
a Identify sources of revenue and expenses.
a Given a list of transactions, categorize
revenues and expenses.

4. Importance of an Income
Statement
a Did the business end the year with
a profit or loss?
a How much was the profit/loss?

5. Uses of Income Statement
a Summarize revenues & expenses
a Determine profit/loss
a Explain changes in owner equity

6. Uses of Income Statement
a Calculate financial measures
a Support loan application

7. Summary of Revenue & Expenses
a Revenue = cash receipts from
product sales or dividends on
interest income.
• Short or long term asset sales
• Inventory adjustments

8. Examples of Revenues
a Cash Revenues
• Cash sales
• Government payments
• Custom work receipts

9. Examples of Revenues
a Non-cash Revenues
• Acct. Receivable
• Changes in inventory

10. Summary of Revenue & Expenses
a Expenses
• operating
• interest
• non-cash expense adjustment

11. Examples of Expenses
a Cash operating
• seed
• fertilizer
• chemicals

12. Examples of Expenses
a Non-cash expenses
• depreciation
• changes in unused supp., acct. pay., accrued
int., accrued taxes

13. Net Income
a Net income = revenue - expenses
• Net income calculated annually
• Corresponds with income tax reporting
dates

14. Cash Accounting - Income St.
cash revenue - cash expenses
= net cash income

15. Cash Accounting - Income St.
net cash income - depreciation
= net income from operations

16. Cash Accounting - Income St.
net income from operation
± gain/loss on sale of capital assets
= net income

17. Accrual Accounting Income
Statement
gross revenue
- cash expenses
- depreciation
± non-cash expense adjustment
= net income from operation

18. Accrual Accounting
Income Statement
net income from operations
± gain/loss on sale of capital assets
= net income