Assignment: Suppose that you are an entrepreneur and your small business has been open more than a year. The funds used to start the business were a combination of your personal savings and a $24,000 business loan from your credit union. You understand the importance of collecting, analyzing, and communicating financial information and therefore you have an Accounting Information System (AIS).
During the previous year your business had Revenues equal to $425,000, Cost of Goods Sold equal to $45,000, and Operating Expenses equal to $210,000, and your business paid Income Taxes totaling $48,000. On the final day of the previous year your business had Total Assets equal to $70,000 and Total Liabilities equal to $20,000.
Prepare a one to two-page report that discusses the following points:
a. Define Revenues and Expenses and explain their relationship to Profit(or Loss)?
b. Using the Revenue and Expense data given above, what was the Net Income last year?
c. What is the Accounting Equation? Explain each term within the Accounting Equation?
d. Using the data given above, what was the Owners' Equity on the final day of last year?