Question

PetCo buys a cat for $100 and sells the cat for $120. What accounts are impacted in the income statement?

Answer 1

PetCo buys a cat for $100 and sells it for $120, thus it is a trading activity.

following journal entry is made in books of accounts

Combined Entry Of Above Transactions
Accounts Description		Debit ($)	Credit ($)
Purchase Account	Dr	100
Income Summary	Dr	20
To Sales Accounts			120
(Being Cat bought at $100 and Sold for $120 and Profit Booked of $20)

Extract of Income statement

Income Statement( Extract)
Particulars	($)
Sales	120
Less:- Purchase	-100
Net Income (Profit)	20

Balance sheet extract as on Date_____.

Balance Sheet (Extract)
Liabilities	($)	Assets	($)
Capital (Surplus)	20	Cash	20
	20		20

Final Answer:-

Three accounts have impact on Income statement :- 1.Purchase account, 2. Sales Account and 3. Income Summary (Net Profit or Loss)