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Lets see if we can use our example to understand the three types of income statements and hopefully understanding those income statements will also help us understand this example so Im going to start off were going to focus on month two and what Ive done is that just rewritten some of this accrual income statement down here so it really looks like a statement so this right here is the. What is the Income Statement.
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The accrual method of accounting is also referred to as the accrual basis of accounting.
The steps involved in an income statement are as follows. One of perhaps 1000 rules in US GAAP is a requirement that the income statement be prepared using the accrual method of accounting. Accrual accounting computes your income based on when a sale was actually made regardless of payment. Although SAP utilizes the framework established under US. An income statement also called a profit and loss statement is one of three major financial statements that all businesses should prepare as part of their financial accounting along with a balance sheet and a cash flow statement. The income statement and comparative balance sheet of Edison Corporation is given below.
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After the accounts have been adjusted and closed the financial statements. Preparing a financial statement is the last step in the accounting cycle before the cycle starts over in a new period. This is the currently selected item.
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