From the course: Accounting Foundations

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Overview of the income statement

Overview of the income statement

From the course: Accounting Foundations

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Overview of the income statement

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- The income statement contains two items revenues and expenses. Revenues minus expenses equals net income. That's it. That's the income statement. But what does the word revenue mean? The meaning is kind of subtle but important. Revenue is the amount of assets created from the sale of goods or services. Let's say that you have a hundred dollars bill. That's an asset. Now, where could you have obtained that asset? Well, you could have borrowed it from somebody. Then we call the source of that asset a liability. Or you could have taken it from your personal savings in which case we call the source of that asset paid in capital. Or you could have gone out and done some work and earned the $100. If you generate the asset through profitable efforts then the source of that asset is revenue. People often have difficulty mixing these two together. Asset and revenue. There's the asset, the hundred dollars and there's the…

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