An inexperienced accounting intern at Krazy Karim prepared the following income statement for the fiscal period 2020. Krazy Karim Income Statement As of December 31, 2020 Revenues: Unearned Revenue 50,000 Services provided to customers 73,000 Accounts Receivable 3,500 Common Stock 21,000 Loan from Bank 17,500 Total Revenues 165,000 Expenses Payments to Principal Portion of Long-term Debt 40,000 Operating Expenses 26,000 Dividends 5,000 Equipment Purchase 19,000 Income Tax Payable 2,400 Income Tax Expense 3,600 Total Expenses 96,000 Net Income 69,000 Identify and explain all of the errors made by the intern. Answer: ________
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
An inexperienced accounting intern at Krazy Karim prepared the following income statement for the fiscal period 2020.
Krazy Karim Income Statement
As of December 31, 2020
Revenues:
Unearned Revenue 50,000
Services provided to customers 73,000
Accounts Receivable 3,500
Common Stock 21,000
Loan from Bank 17,500
Total Revenues 165,000
Expenses
Payments to Principal Portion of Long-term Debt 40,000
Operating Expenses 26,000
Dividends 5,000
Equipment Purchase 19,000
Income Tax Payable 2,400
Income Tax Expense 3,600
Total Expenses 96,000
Net Income 69,000
Identify and explain all of the errors made by the intern.
Answer: ________
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