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What is an Income Statement account?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › What is an Income Statement account?

  • This topic has 6 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • April 5, 2014 at 6:10 pm #164470
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    Hi

    I will try to explain my confusion with a question:

    In closing inventory, the entry is as follows:

    Dr. Inventory Account (closing inv. value)
    Cr. Income Statement

    my question is:

    Is there a physical account called “Income statement” in the Chart of Accounts?

    I will elaborate on my confusion with another example:

    During a write off of a bad debt, the entry is as follows:

    Dr. Irrecoverable Debts
    Cr. Receivable.

    So the T account shows a debit balance in the Irroverable Debts account.

    when it is charged to the Income Statement,

    we see a Cr to the Irrecoverable with the description ‘transfer to Income statement’

    so does this mean that the Income Statement gets debited?

    Of course, in all of the Chart of Accounts, i have not seen a chart that has explicitly an account called Income Statement.

    Please not, I understand all the entries and the logic. am just trying figure out this Income Statement thing.

    Appreciate all the help

    Regards

    Mansoor

    April 5, 2014 at 7:49 pm #164477
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    Thank u for replying.

    but then what does “Inventory Account SOFP” or “Inventory Account Income Statement” mean?

    am i correct in assuming that it is just the Inventory Account that is physically present in the chart of accounts?

    or there are 2 accounts which are called “Inventory Account SOFP” and “Inventory Account Income statement” present in the chart?

    regards

    April 5, 2014 at 8:18 pm #164480
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    You should not have posted this question on here – it is not an F6 problem.
    Also, lilianafiott should not have replied – she/he is not a tutor.

    lilianafiott is wrong!

    There is an account called Income Statement Account (which is rewritten at the end of the year in the standard format).

    The double entry at the end of the year, DV Inventory A/C and CR Income Statement A/C.

    If you watch my Paper F3 lecture on here (which is free) about Inventory, then you will see an explanation of the entries.

    April 5, 2014 at 8:31 pm #164489
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    Dear John

    It must have been a mistake because i didnt post it in f6.

    now that i know there is an Income statement account, i assume that there is also an SOFP account?

    I understand the entries.

    in one of ur lectures on Receivable Allowance, the Irrecoverable Debt account has a final debit balance, lets say X.

    you transfer this amount to the income statement by

    Dr Income Statement
    Cr Irrecoverable Debt

    so it is safe to assume that at year end, the income statement and sofp accounts are created in the chart of accounts or its just a formatting thing?

    April 5, 2014 at 10:10 pm #164497
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    The inventory account appears in the SOFP.

    As you will know from my lectures, the statement of financial position is just a list of the balances left on the accounts.

    April 5, 2014 at 11:01 pm #164500
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    Dear John

    Saw your lectures .. and as usual.. it solved my basic confusion.

    for those who r doing self study … this service is truly in a class by its self!

    congratualtions!!

    April 6, 2014 at 12:52 am #164503
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    Thank you 🙂

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • The topic ‘What is an Income Statement account?’ is closed to new replies.

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