determined by deducting the operating expenses from the fees earned from normal
operations. The other income—rental revenue—is then added to determine the net
income for November.
As reported on the income statement, revenuesare a result of providing services or
selling products to customers. Examples of revenues include fees earned, fares earned,
commissions revenue, interest revenue, and rent revenue.
Revenues from the primary operations of the business are normally reported sep-
arately from other revenue. For example, Family Health Care has two types of rev-
enues for November, fees earned and rental revenue. Since the primary operation of
the business is providing services to patients, rental revenue is reported under the
heading of “Other income.”
Expenseson the income statement are assets used up or services consumed in the
process of generating revenues. Expenses are matched against their related revenues
to determine the net income or net loss for a period. Examples of typical expenses in-
clude wages expense, rent expense, utilities expense, supplies expense, and miscella-
neous expense. Expenses not related to the primary operations of the business are
sometimes reported as “Other expense.” Interest expense is an example of an expense
that may be reported separately as an Other expense.112 Chapter 3 Accrual Accounting Concepts
Exhibit 3
Family Health Care
Income Statement
for NovemberExhibit 4
Family Health Care
Retained Earnings
Statement for
NovemberFees earned $12,350
Operating expenses:
Wages expense $3,010
Insurance expense 1,100
Rent expense 800
Utilities expense 580
Depreciation expense 160
Supplies expense 150
Interest expense 100
Miscellaneous expense 420
Total operating expenses 6,320
Operating income $ 6,030
Other income:
Rental revenue 360
Net income $ 6,390Retained earnings, November 1, 2007 $3,320
Net income for November $6,390
Less dividends 1,200 5,190
Retained earnings, November 30, 2007 $8,510Family Health Care, P.C.
Retained Earnings Statement
For the Month Ended November 30, 2007Family Health Care, P.C.
Income Statement
For the Month Ended November 30, 2007