You are the manager of an individual factory that is part of a larger Company. Your factory obviously has costs, but does it have expenses? If your Factory does have expenses, where do the expenses show up on the Income Statement? Explain your answer.
The Income Statement
The Income Statement, one of the four required financial statements as required by Generally Accepted Accounting Principles, details the revenues and expenses of a business over the past reporting period. The income statement has all temporary accounts, which means that the amounts reset to zero at the end of the period.
Answer and Explanation:
Yes, the business will have expenses. The expenses would either be:
- Shown, at a summary total, for all of the expenses of the business. For example, all rent costs (including the current business' rent) would be rolled up into the parent companies rent expense; or
- If the entity is large enough, it will be listed separately in the income statement with its own breakout of revenue and expenses.
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from Accounting 101: Financial AccountingChapter 2 / Lesson 2