F INANCIAL S TATEMENTS FOR A P ROPRIETORSHIP Chapter 7, Section 1.
-
Upload
roger-collins -
Category
Documents
-
view
213 -
download
0
Transcript of F INANCIAL S TATEMENTS FOR A P ROPRIETORSHIP Chapter 7, Section 1.
FINANCIAL STATEMENTSFOR A PROPRIETORSHIPChapter 7, Section 1
ACCOUNTING CONCEPTS
CONCEPT: Adequate Disclosure Financial statements contain all information
necessary to understand a business’s financial condition.
CONCEPT: Accounting Period Cycle Financial statements are always prepared at the
end of the fiscal period.
CONCEPT: Matching Expenses with Revenue The revenue earned and the expenses incurred to
earn that revenue are reported in the same fiscal period.
Would you work for a year (or even a month) without knowing how much you would be making?
INCOME STATEMENT
Shows financial progress over a period of time
Includes revenue, expenses, and net income/loss
Data obtained from Income Statement columns of the worksheet
PREPARING AN INCOME STATEMENT
Heading
3.Date of Report
1. Name of Company2.Name of Report
1
2
3
PREPARING AN INCOME STATEMENT (CONT.)
When listing amounts, the two columns are used to indicate different levels of calculations. First column is for account balances Second column is for section totals The columns are NOT debit and credit columns!
Sections include: Revenue Expenses Net Income/Loss
Section heading are written at the left Account titles are indented
PREPARING AN INCOME STATEMENT (CONT.)
1. Write the name of the first section.
2. Write the title of the revenue account.
3. Record the balance of the account.
4. Write the name of the second section.
5. Write the title of each expense account.
5
13
42
118 97
131412
6. Record the balance of each account.
7. Rule a single line.
8. Write Total Expenses.
9. Record total expenses.
10. Rule a single line.
11. Calculate net income.
12. Write Net Income.
13. Record net income.
14. Rule double lines.
6
10
COMPONENT PERCENTAGES
Percentage relationship between one financial statement item and the total that includes that item
Based on net sales
Total Expenses Percentage Total expenses ÷ Net sales
Net Income/Loss Percentage Net Income/Loss ÷ Net sales
COMPLETED INCOME STATEMENT
INCOME STATEMENT WITH TWO REVENUE ACCOUNTS AND A NET LOSS
1Revenue
3 Revenue amounts2Account titles
6Net Loss
7Record Net Loss(negative amounts are written in parentheses)
4 Total Revenue
5 Total of revenue