Ledger accounts that can be found in the income statement are called Temporary accounts of Nominal

accounts. They are called such because at the end of the accounting period, balances under these
accounts are transferred to the capital account, thus having only temporary amounts and resulting to
zero beginning balances at the beginning of the following year (Haddock, Price, & Farina, 2012).
Examples of temporary accounts include revenues, sales, utilities expense among others. Depicted in
figure 8 is sample format of an income Statement.

The different parts of income statement are:

The heading or title of report

Name of the company

Date or period covered

Majot parts are:

Income or Revenues- consist of all income received within the period upon provision of services for
service-concern business and sales for merchandising.

Expenses- money spent during the conduct of business operations.

Net income / net loss- the outcome of business operations.

ABC Company

Income Statement

For the period ended June 2018

Service Income P XXX

Salaries and wages XXX

=====

Figure 8 – Income Statement of a Service type Business

Also known as the statement of financial position. This statement summarizes the total balanc of assets,
liabilities and owner’s equity. In general, it provides the financial condition of the business on a specific
date.

The balance sheet is composed of Permanent accounts. Permanent in nature because their balances
remain intact and will be forwrded from one period to another.

Contra assets are those asset account presneted under the asset portion of the balance sheet such as
Allowance for Bad Debts and Accumulated depreciation. Depicted in figure 9 below is sample format of
a balance sheet of a service type business presented in as an account format with contra asset account.

The different types of Balance Sheet are:

The heading or title of report

Name of the Company

Date or Period covered

Major parts are:

Assets (Current and Non-current)

Current Assets- Assets that can be realized (collected, sold, used up) one year after year-end date.
Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid Expense, etc.

Current Assets are arranged based on which asset can be realized first (liquidity). Current assets and
current liabilities are also called short term assets and shot term liabilities.

Noncurrent Assets- Assets that cannot be realized (collected, sold, used up) one year after year-end
date. Examples include Property, Plant and Equipment (equipmment, furniture, building, land), Long
Term investment, Intangible Assets etc.

Liabilities (Current and Non-current)

Current Liabilities- Liabilities that fall due (paid, recognized as revenue) within one year after year-end
date. Examples include Notes Payable, Accounts Payable, Accrued Expenses (example: Utilities Payable),
Unearned Income, etc.

Noncurrent Liabilities- Liabilities that do not fall due (paid, recognized as revenue) within one year after
year-end date. Examples include Loans Payable, Mortage Payable, etc. Noncurrent assets and
noncurrent liabilities are also called long-term assets and long-term liabilities.
Owner’s Equity or Capital

-Capital is an item of balance sheet wherein the capital or interest of the owner of the business is listed.
Initial withdrawal of capital will be recorded in a drawing account of the owner and will be reflected as
aa deduction to the capital balance.
 ABC
Balance Sheet
As of June 2018

ASSETS

Cash P XXX
Accounts receivable P XXX
Less: Allowance for Bad debts XXX XXX
Prepayments XXX
Inventories XXX
Land XXX
Building XXX
Less: Accumulated Dep’n-Bldg XXX XXX
Equipment XXX
Less: Accumulated Dep’n-Eqpt XXX XXX
Other Assets XXX
Total Assests P XXX
== ====
Figure 9 – Balance Sheet of a Service type Business

(Account Form)
 LIABILITIES P XXX
Accounts Payable XXX
Notes Payable XXX
Interest Payable XXX
Mortage Payable P XXX
Total

OWNER’S EQUITY
Owner Capital P XXX
Less: Owner Drawing (XXX)
Total Owner’s Equity P XXX
Total Liabilities and Owner’s Equity P XXX
=====
Figure 9 – Balance Sheet of a Service type Business

(Account Form)