Balance Sheet and

Net Income

Balance Sheet

• Debit side. • Credit side.

=

•Debit side:

• Assets:

• Fixed assets.

Or ( Non financial assets )

Or ( PP&E )

• Current assets.

Or ( Financial assets )

Notes:

• Account receivable.• Notes receivable.

• Credit side:

• Owners Right.

or Owners Equity.

• Liabilities.

Notes:

• Account payable.

• Notes payable.

Net Income

There are 3 methods of the net income…

Elements:

1. Sales.

2. COGS ( Cost of sales )

3. Gross Profit or Contribution Margin.

4. Manufacturing & non manufacturing costs.

5. Net income.

COGS

• Cost of good sold. • Cost of sales.• BEG.inv. cost + production cost – End inv.Cost

Gross Profit or Contribution Margin:

= Sales – Cost of sales

Manufacturing & non manufacturing costs

• 1ST: Manufacturing cost:

– Mark-up structure.

– Fixed cost: { Ex. The rent of the land or buildings, maintenance of the machines, insurance …etc }

– Variable cost: { Ex. Electric, water, materials, labor costs, property taxes ….etc }

• 2nd: Non manufacturing cost:

– Marketing & selling costs:» Include advertising costs, shipping costs, sales

commission and sales salary.

– Administrative costs: » Include all executive and organizational costs associated

with general management of an organization.

Net Income = Gross profit – Non manufacturing cost