Basic Accounting: Income Statement

Some accounting notes that I have been keeping, and I put them together here.

Use the acronym "DC ADE LER" to remember about debits and credits easily.

Income Statement = Revenue - Expenses
(Revenue minus Expenses also known as Net Income)

Net Income is a part of Total Equity, which is the change in a company's equity during a period, resulting from transactions and other events and circumstances from non-owner sources.

Since Owner's Equity is also a part of Total Equity, Net Income can also be calculated using a rewrite of the Accounting Equation:

from: Assets = Liabilities + Equity
to: Assets – Liabilities = Total Equity (Owner's Equity + Net Income)

Move Owner's Equity to the other side of the equation, and the equation becomes:

Assets – Liabilities – Owner's Equity = Net Income
or Net Income = Assets – Liabilities – Owner's Equity

Net Income is then inserted at the end of the Equity section of the Balance Sheet, thus it completes the Accounting Equation for the Balance Sheet: Assets = Liabilities + Equity (Owner's Equity + Net Income).