 Hello, in this presentation we are going to introduce the income statement, which will not be a statement declaring that we desire income. Last time we talked about the balance sheet and we asked the question if we were to ask you how much money you have on you at this point in time, it is possible to pull the money out of our pockets and say, hey, this is how much we have at this point in time. We may not want to do that, but it's possible to do that. On the income statement, we're going to ask the question to introduce the topic of how much money do you make? When we ask that question, then we need to ask some other questions in order to answer that. We have to say, well, what do you mean? Do you mean a month, a year, a week? We need some type of timeframe in order to answer that question. We often do that intuitively, make an assumption of the timeframe, but we need some type of timeframe. That's going to be the difference between the income statement and the balance sheet. The balance sheet has a point in time. The income statement tell them the story of how we got to that point in time. For example, we will be looking at the month of December 1st through December 31st. You can think of it similar to trying to see how many miles you can drive within that same month's time period. What you would do is probably set the odometer to zero and then drive upwards for a month and see how many miles that you drive. Well, that's what we're going to do with the income statement. We're saying as December 1st, we have revenue of zero. As we drive through the month, we have revenue in this case that then ends at the end of the month, December 31st, at this case of $10,100. You might be asking, well, does that mean that we didn't make any money in November or is this the first year of operations? And no, it's not the first year of operations necessarily. It means that as of the end of November, we reset the odometer. We said, hey, we drove this many miles in November. We want to see how many miles we're going to drive now next month. Just like resetting the odometer in something like a race like that to see many miles we drive. We're going to reset the temporary accounts in terms of the income statement. All income statements are going to be zero as of December 1st so that we can count from zero upwards till the end of the month and see in this case that we're going to say revenue is going to be $10,000. That's how much we earned during this period of time. That's going to be the essence of the income statement. Telling the story of how we're doing. Usually that's represented by saying it's going to be for the month ended in this case, December 31st. That phrasing can be a little deceiving because we see the endpoint. We just see December 31st but we don't see the beginning point. We don't see December 1st. We have to assume that month ended means it began at the beginning of the month which is December 1st through December 31st. The income statement can be represented by a formula in its basic form which would be revenue minus expenses equals net income. When we think about the revenue side of things, there are usually less revenue accounts. Revenue will be greater in dollar amount but we usually specialize, meaning we're not doing a lot of different things. In this case we're just going to be doing computer service. That's all we do. That's the only type of revenue that we have. As opposed to expenses which is everything else that we consume in order to generate that revenue is going to be an expense. For example, the phone could be an expense. We can have the auto expense, not the auto itself, an asset, but the gas and the maintenance would be an expense. That's what we consumed. We could have wages expenses. We could have supplies expenses. Again, not the supplies themselves, but as we use them, as we consume them, then we are expensing them. We can have meals and entertainment. We have the revenue, what we're going to generate over this certain time period, this month's time period, expenses, the things that we had to then consume in order to help us generate that revenue. The revenue minus expenses is going to be the net income. That's going to increase the equity. The owner here is receiving the net income. It doesn't mean that the owner's necessarily going to pull out the income. But what it does mean is that the company, the separate sheet of paper, now owes the owner more money by the revenue minus the expenses that was generated for that month, that time period. We are now going to apply some numbers to the revenue and the expenses and look at the income statement. So on the revenue side, again, there's only one type of thing we do. So we're going to say the revenue that we earned was 10,000. We don't need any subcategories. Sometimes some companies might have a couple different things. They do for revenue, but typically not too many things. We specialize in a particular thing. And so we're just going to have one line item revenue, $10,000 on the expense side. Of course, we're going to have more things that we're going to have to expend in order to help generate that revenue. The dollar amount hopefully will be less. But the things that we spend that money on will very more great. Therefore, we're going to have the expenses, colon subcategorizing and we'll list out the expenses as wages of $2,000, auto expense. We're going to say, again, that's the gas and the maintenance $600. We're going to have the supplies of 400. That's what we consumed. And we're going to have the telephone expense $300 and we're going to have the meals and entertainment 200. There's no particular order that the income statement has to be listed in, but we do want to list the expenses in some type of logical order. So oftentimes the most expensive expense or the largest cost being on top is a logical format to list the expenses in. But the important thing is that if we add up all the expenses $2,000 plus the $600 plus the $400 plus the $300 plus the $200 means that we have total expenses, total things that we consumed in order to help us generate revenue of the $3,500 in this case. Therefore, our income statement, which will be stated for the month ended, meaning December 1st, December 3rd, 31st, we have income, the one line item, the computer service $10,000. Then we're going to subcategorize all the expenses, wages, auto supplies, telephone meals. That adds up to that $3,500. So in essence, our equation in terms of the income statement equation, in terms of the equation for net income, the bottom line of the income statement was revenue minus expenses equals that net income. In this case, $6,500. That's how much the equity section has gone up. Again, the owner could pull that money out in terms of a draw, but doesn't have to. If it remains in the business, that means the amount of money in terms of the point in time in terms of the balance sheet has gone up for the period December 1st through December 31st by $6,500 revenue minus expenses.