chapter_2
17
Financial Statements A set of Financial Statements consist of four related accounting reports that summarizes the financial resources, obligations, profitability and cash transaction of a business in the few pages 1. Income Statement: Profitability of business 2. Balance Sheet: Financial resources and obligations 3. Statement of Owner’s Equity: Obligation of business to Owner 4. Statement of Cash Flow: Cash Transaction of a Business.
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Transcript of chapter_2
Financial Statements
A set of Financial Statements consist of four related accounting reports that summarizes the financial resources, obligations, profitability and cash transaction of a business in the few pages
1. Income Statement: Profitability of business2. Balance Sheet: Financial resources and obligations3. Statement of Owner’s Equity: Obligation of business
to Owner4. Statement of Cash Flow: Cash Transaction of a
Business.
Income Statement
A statement that shows the profit or loss of the business for a specific time period. This statement consisting;
Revenue for the accounting period Expenses for the accounting period
ABC CorporationAdjusted Trial Balance
for the month of March 2009
S/No L/No Items Dr Cr
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Cash
Accounts receivable
Land
BuildingAccumulated Depreciation: Building
Office equipmentAccumulated Depreciation: equipment
Accounts payable
Capital: James Roberts
Drawings: James Roberts
Sales Commission earned
Advertising expenses
Salaries expenses
Telephone expenses
Depreciation expense: building
Depreciation expense: equipment
$ 15,490
17,890
130,000
36,000
5,400
2,800
630
7,100
144
150
45
150
45
23,814
181,000
10,640
Total $ 215,649 $ 215,649
Income StatementROBERTS REAL ESTATE COMPANY
Income StatementFor the month ended March 30th, 2009
______________________________________________________________
Revenue:Sales commission earned………………………………… $ 10640
Less; Expenses:Advertising expense…………………………… $ 630Salaries expense………………………….......... 7,100Telephone expense……………………………. 144Depreciation expense: building……………… 150Depreciation expense: office equipment.. 45 (8,069)
Net Income……………………………………………………………….. $ 2,571*
* It is a part of owner’s equity because is to be paid to owner of the business
Income Statement - 1
Income Statement - 2
Statement of Owner’s Equity
This statement shows the obligation of business to its owner. This statement consisting ;
Capital invested by owner Profit of the current accounting period Drawings of the owner
ABC CorporationAdjusted Trial Balance
for the month of March 2009
S/No L/No Items Dr Cr
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Cash
Accounts receivable
Land
BuildingAccumulated Depreciation: Building
Office equipmentAccumulated Depreciation: equipment
Accounts payable
Capital: James Roberts
Drawings: James Roberts
Sales Commission earned
Advertising expenses
Salaries expenses
Telephone expenses
Depreciation expense: building
Depreciation expense: equipment
$ 15,490
17,890
130,000
36,000
5,400
2,800
630
7,100
144
150
45
150
45
23,814
181,000
10,640
Total $ 215,649 $ 215,649
ROBERT REAL ESTATE COMPANYStatement of Owner’s Equity
as on March 30th, 2009
Capital: James Robert…….... $ 181,000Add: Profit for the period........ 2,571*
$ 183,571 Less: Drawings: ……………... 2,800
Net Owner’s Equity…….......... $ 180,771
* Form Income Statement
Owner’s Equity Statement
Balance Sheet
That statement which shows the financial position of the business on a particular time is called “Balance Sheet”. This statement shows the resources of the business as well as the obligation of the business.
Balance sheet consisting; Assets of the business Liabilities of the business Owner’s Equity
ABC CorporationAdjusted Trial Balance
for the month of March 2009
S/No L/No Items Dr Cr
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Cash
Accounts receivable
Land
BuildingAccumulated Depreciation: Building
Office equipmentAccumulated Depreciation: equipment
Accounts payable
Capital: James Roberts
Drawings: James Roberts
Sales Commission earned
Advertising expenses
Salaries expenses
Telephone expenses
Depreciation expense: building
Depreciation expense: equipment
$ 15,490
17,890
130,000
36,000
5,400
2,800
630
7,100
144
150
45
150
45
23,814
181,000
10,640
Total $ 215,649 $ 215,649
ROBERT REAL ESTATE COMPANYBalance Sheet
as on March 30th, 2009
Assets:
Cash ………………………………………………………… $ 15,490
Accounts receivable…………………………………..…… 17,890
Land………………………………………………………..…. 130,000
Building…………………………………………. 36,000
Less: Accumulated Depreciation: Building… (150) 35,850
Office equipment…………………………......… 5,400
Less: Accumulated Depreciation: equipment.. (45) 5,355
Total Assets……………………………………………………………. $ 204,585
Liabilities:
Accounts Payable…………………………………............... $ 23,814
Owner’s Equity:
James Roberts……………………………………………….. $ 180,771
Total Liabilities & Owner’s Equity…………………………….. $ 204,585
Balance Sheet - 1
Balance Sheet - 2
Cash Flow Statement
A statement that shows the flow of cash during an accounting period. That how much cash comes in to the business and from which sources? And how much cash goes out from the business and for what purposes?
Cash Flow Statement containing three type of activies:
Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities
Cash Flow Statement - 1
