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We know that net income/loss is found by this equation:

Net income/loss = Revenues - Expenses

But what if both revenue and expense statements are unknown? I have the following information of the company:


December 31, 2008

Assets: $55,000
Liabilities: $26,000
Equity: $29,000

December 31, 2009

Assets: $58,000
Liabilities: $35,000
Equity: $23,000

During the year 2009
Owner's Investments: $12,000
Owner's Withdrawals: $10,000


How do I find out the net income/loss based on the provided information?

6
  • equity dropped 5k while the owner injected net capital of 2k so it lost 7k.
    – doug
    Apr 16, 2018 at 5:24
  • @doug how did you come at 7k? Sorry but I'm a newbie in accounting. I'd really appreciate step-by step instructions if you can provide
    – Steve
    Apr 16, 2018 at 5:41
  • @Steve This is a homework question, so presumably the answers + guide is in the back of your textbook / ask your teacher. Apr 16, 2018 at 12:54
  • Questions about accounting are off-topic unless they relate directly to personal finance or investing from an individual's perspective. Apr 16, 2018 at 15:01
  • @Grade'Eh'Bacon if I could've just done that, I wouldn't have asked here, would I?
    – Steve
    Apr 16, 2018 at 17:15

1 Answer 1

0

Net income can also be measured as the change in equity.

Net income/loss = Ending equity - Starting equity

In your case the equity has also been changed by the owner investing and withdrawing money from the company, so we need to adjust for that:

Net income/loss = Ending equity - Starting equity + owner withdrawals - owner investments

Net income/loss = 23000 + 10000 - 29000 - 12000 = -8000

The company had a net loss of $8000.

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