Income Statement for Leak-Stoppers LLC for the Year Ended 31st Essay

Income Statement for Leak-Stoppers LLC for the twelvemonth Ended 31st December 2013 - Essay ExampleAs the discussion outlines, the accrual concept states that revenue enhancement is recognized when it is earned and realized or realizable while expenses are recognized in the finale in which the related revenue is earned. In the case of Mr. Mansoor, the insurance premium expenses can only be realized when revenue is earned and therefore the prepaid premium of 200 is subtracted from 800 to obtain premium expense of 600. Also the interest expense for the cash borrowed from Mustafa is an example of accrued expense. The principle states that a lodge should get across an expense on the income statement in the same period that the related revenue is earned. For instance, the depreciation expenses for the non-current assets much(prenominal) as plumbing equipment and van are only recognized to the current year i.e. at the obliterate of 2013 when they might have earned revenue. The pruden ce concept states that the transactions that the fellowship is uncertain about should non be overstated or understated. Mr. Mansoor has exercised the prudence concept since he has created allowance for the doubtful debts that should be pen off i.e. 10% of the accounts receivable. Since the company was able to record a net profit of $12,926, this shows that its currents expenses are little than its revenues/income. Therefore, the company is able to meet its short-term fiscal needs. Additionally, the income statement shows that the company is liquid and can be able to meet its daily/short-term needs. The balance sheet reflects a snapshot of the performance of the company on a single date its usually on the last date of the financial year. Judging from the income statement, the companys financial performance as at 31st Dec 2013, the companys current ratio i.e. current assets/current liabilities, 10,887/1,773=6.14 shows that the company is able to pay the bills.