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Explain how the Income Statement can apply to an individual's everyday life?
An income statement is a financial statement that gives operating results or the financial performance of a company for a specific period. It is also referred to as loss and profit statement or a statement of revenue or expenses. For an individual, the income statement shows his various revenues and expenses. He uses it to monitor how the revenues are used against the expenditures. This will enable the individual know his financial performance as at a given date. It keeps the individual from becoming financially unstable and live within his means.
It is used by an individual in his personal life by use of by coming up with personal budgets. The individual generates a plan in relation to using his revenue against his expenses and keeps track of his activities. The individual also gets to know whether he is overspending or under spending. A personal income statement consists of his expenses such as rent expenses, expenses on foodstuffs, electricity expenses among others. The individual, therefore, assigns each of the expenses on his income.
The individual is also able to find out the most viable options that he should undertake. Smith (2009) asserts that he is able to organize his undertakings in such a way that he gives priority to the one that gives him maximum revenue and less cost on the expenses. It, therefore, guides the individual to undertake on the most profitable. How can a business manager benefit from understanding the Income Statement?
A business manager is the individual who manages the work of others in order to run a business effectively and a make profit. The income statement helps the business managers coordinate the firm's activities and make necessary adjustments in such a way that they will generate profit. The activities of a firm include operating and non- Through the help of the income statements, they come up with business plans and decisions that will help increase profitability. The business plans may entail the estimated revenue matched with the expenses of the firm. By studying the past income statements the business manager is able come up with a viable business plan.
The income statement also help the business manager know the financial performance of the business. Through it, he is able to know whether the business is underperforming or over performing. A profit shows that the business is performing well while a loss shows poor performance (Smith, 2009).
How can an auditor's understanding of the balance sheet and income statement be applied to their everyday job?
An auditor is an individual who reviews, analyze, investigate, evaluate the financial statements of a business and make a report concerning a true and fair view of the business. A balance sheet is a financial statement that gives a summary of a company's asset, liabilities and shareholders' equity. It shows the financial position and the financial strength of a business. On the other hand, the income statement shows the financial performance of the business by showing us its profitability (Smith, 2009).
Auditors understanding of these financial statements will enable him state a true and fair position of the company. He examines the various components of the balance sheet and the income statement and comes up with a report on the financial position and the financial position of the business. This report is helpful to the shareholders, the government, potential shareholders among others.
According to Smith (2009), the audit work mainly involves analyzing of the financial statement. The auditor, therefore should, have a clear understanding of the income statement and the balance sheet. He critically evaluates the incomes, expenses, assets, liabilities and shareholders' equity.
This Article has presented comprehensive information in relation to application of a statement in a person's life in addition to auditors and finally the benefits of understanding a financial statement.
An income statement is a financial statement that gives operating results or the financial performance of a company for a specific period. It is also referred to as loss and profit statement or a statement of revenue or expenses. For an individual, the income statement shows his various revenues and expenses. He uses it to monitor how the revenues are used against the expenditures. This will enable the individual know his financial performance as at a given date. It keeps the individual from becoming financially unstable and live within his means.
It is used by an individual in his personal life by use of by coming up with personal budgets. The individual generates a plan in relation to using his revenue against his expenses and keeps track of his activities. The individual also gets to know whether he is overspending or under spending. A personal income statement consists of his expenses such as rent expenses, expenses on foodstuffs, electricity expenses among others. The individual, therefore, assigns each of the expenses on his income.
The individual is also able to find out the most viable options that he should undertake. Smith (2009) asserts that he is able to organize his undertakings in such a way that he gives priority to the one that gives him maximum revenue and less cost on the expenses. It, therefore, guides the individual to undertake on the most profitable. How can a business manager benefit from understanding the Income Statement?
A business manager is the individual who manages the work of others in order to run a business effectively and a make profit. The income statement helps the business managers coordinate the firm's activities and make necessary adjustments in such a way that they will generate profit. The activities of a firm include operating and non- Through the help of the income statements, they come up with business plans and decisions that will help increase profitability. The business plans may entail the estimated revenue matched with the expenses of the firm. By studying the past income statements the business manager is able come up with a viable business plan.
The income statement also help the business manager know the financial performance of the business. Through it, he is able to know whether the business is underperforming or over performing. A profit shows that the business is performing well while a loss shows poor performance (Smith, 2009).
How can an auditor's understanding of the balance sheet and income statement be applied to their everyday job?
An auditor is an individual who reviews, analyze, investigate, evaluate the financial statements of a business and make a report concerning a true and fair view of the business. A balance sheet is a financial statement that gives a summary of a company's asset, liabilities and shareholders' equity. It shows the financial position and the financial strength of a business. On the other hand, the income statement shows the financial performance of the business by showing us its profitability (Smith, 2009).
Auditors understanding of these financial statements will enable him state a true and fair position of the company. He examines the various components of the balance sheet and the income statement and comes up with a report on the financial position and the financial position of the business. This report is helpful to the shareholders, the government, potential shareholders among others.
According to Smith (2009), the audit work mainly involves analyzing of the financial statement. The auditor, therefore should, have a clear understanding of the income statement and the balance sheet. He critically evaluates the incomes, expenses, assets, liabilities and shareholders' equity.
This Article has presented comprehensive information in relation to application of a statement in a person's life in addition to auditors and finally the benefits of understanding a financial statement.
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