Financial Statement Preparation and Analysis

1. Chapter 8 Section 1 The income statement

2. Step #7 in the accounting cycle • Our job now is to take the information and place it on financial sheet so that our stockholders can read the information better. • Order you must do Financial Sheets • Income Statement • Balance Sheet

3. Heading of the Income Statement • Name of the Company • Name of the financial sheet • Time of when the sheet is created

4. 2650 75 600 700 125  1500 1150

5. Income Statement with 2 Sources of Revenue • We need to look at page 179 in your text book so you understand how to put together an Income Statement when you have more than 1 Revenue Account.

6. Calculating Percentages % of Sales 100.0 2650 75 600 700 100 500 125 2100 79.2 550 20.8 To calculate: divide 2100/2650 = 79.2% 550/2650=20.8% Proof: 100.0 – 79.2 = 20.8

7. Cross through Work together on page 157 in your work book. • We will do the On Your Own on page 158 together.

8. Chapter 8 Section 2 The Balance Sheet

9. The Balance Sheet • What types of accounts go on the balance sheet? • Asset • Liabilities • Owners Equity

10. Asset 21125.00 Cash in Bank Accounts Receivable-City News 1450.00 Accounts Receivable-Green Company Computer Equipment 3000.00 Office Equipment 200.00 Delivery Equipment 12000.00 Total Assets 37775.00 Liabilities 75.00 Accounts Payable – Beacon Advertising 11650.00 Accounts Payable – North Shore Auto 11725.00 Total Liabilities Owners Equity Maria Sanchez, Capital Total Liabilities and Owners Equity

11. The only part of the Balance sheet that is different is how do we calculate The owner’s Capital Account? Asset 21125.00 Cash in Bank Accounts Receivable-City News 1450.00 Accounts Receivable-Green Company Computer Equipment 3000.00 Office Equipment 200.00 Delivery Equipment 12000.00 Total Assets 37775.00 Liabilities 75.00 Accounts Payable – Beacon Advertising Accounts Payable – North Shore Auto 11650.00 Total Liabilitie3s 11725.00 Owners Equity Maria Sanchez, Capital Total Liabilities and Owners Equity

12. In order to find the right number to go into the Capital balance there is an equation That we need to remember. How much did we start with = Beginning Capital Balance How much did we make = Net Income How much did we take away (Drawing) = Balance in drawing account 25400 + 1150 - 500 = 26050 This is the number that goes on The Balance Sheet Net income from either our Income Statement sheet or our worksheet

13. Now that we have the rest of the numbers we can finish the balance sheet Asset 21125.00 Cash in Bank Accounts Receivable-City News 1450.00 Accounts Receivable-Green Company Computer Equipment 3000.00 Office Equipment 200.00 Delivery Equipment 12000.00 Total Assets 37775.00 Liabilities 75.00 Accounts Payable – Beacon Advertising Accounts Payable – North Shore Auto 11650.00 Total Liabilities 11725.00 Owners Equity 26050 Maria Sanchez, Capital Total Liabilities and Owners Equity 37775.00 Note how this balance sheet differs from those we did at the beginning of the semester!!!!!

14. Example problems • We need to practice together how to do the new balance sheet. Please cross out page 159 in your work book. We will do page 160 together • Expect that there will be a test this week (probably Wednesday) on how to put together a Balance Sheet (the new way) and an Income Statement • Problems 8-1, 2, 3