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When you make a sizable cash purchase that will probably take more than one accounting period to complete, your cash asset decreases and your supply account increases in the current assets. The financial equation is still in balance. The cash and supplies accounts are updated after a cash supply purchase. If you pay for the items with cash, your cash balance will drop, and the expenses for the supplies will appear on your income statement.
What is an income statement?
One of the most often and important financial statements you're likely to see is an income statement. Income statements, sometimes referred to as profit and loss (P&L) statements, include the cumulative effect of revenue, gain, expense, and loss transactions and include a summary of all income and expenses over a certain period.
Why is income statement prepared?
An income statement's function is to reveal financial details about a company's performance over the course of a fiscal year to readers, creditors, and investors. The income statement, as used in corporate finance, is a summary of the company's profit and loss for the entire fiscal year.
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