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Accounting Bellwork

Chapter 9. $. Accounting Bellwork. 3 rd Hour: A Matter of Ethics p213. $. $. $. Chapter 9. $. Section 3 The Balance Sheet. $. What You’ll Learn The purpose of a balance sheet. How to prepare a balance sheet. How to analyze information on financial reports. $. $.

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Accounting Bellwork

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  1. Chapter 9 $ Accounting Bellwork 3rd Hour:A Matter of Ethics p213. $ $ $

  2. Chapter 9 $ Section 3 The Balance Sheet $ • What You’ll Learn • The purpose of a balance sheet. • How to prepare a balance sheet. • How to analyze information on financial reports. $ $

  3. Section 3 The Balance Sheet (con’t.) Chapter 9 $ Why It’s Important The balance sheet reports the financial position of a business at a specific point in time. $ $ • Key Terms • balance sheet • report form • ratio analysis • profitability ratio • return on sales • liquidity ratio • current ratio • current assets • current liabilities • quick ratio $

  4. Section 3 The Balance Sheet (con’t.) Chapter 9 $ The Balance Sheet The balance sheet is a report of the balances in all asset, liability, and owner’s equity accounts at the end of the period. Balancing the ALOE $ $ $

  5. Section 3 The Balance Sheet (con’t.) Chapter 9 $ The Balance Sheet (con’t.) The balance sheet represents the basic accounting equation; thus, the assets section total must equal the total of the liabilities and owner’s equity sections. It is prepared in report form $ $ $ Assets = Liabilities + Owner’s Equity

  6. Point in time Section 3 The Balance Sheet (con’t.) Chapter 9 The Balance Sheet (con’t.) $ $ $ $ Make sure and get this total from the Statement of Changes In Owners Equity Ending Capital Total

  7. Section 3 The Balance Sheet (con’t.) Chapter 9 $ Ratio Analysis • Ratio analysis involves the comparison of two amounts on a financial statement and the evaluation of the relationship between these amounts. • Used to determine the financial strength, activity, or debt-paying ability of a business. $ $ $

  8. Section 3 The Balance Sheet (con’t.) Chapter 9 $ Ratio Analysis con’t. • Profitability ratios are used to evaluate the earnings performance of the business during the accounting period. $ $ $

  9. Section 3 The Balance Sheet (con’t.) Chapter 9 $ Return on Sales $ • Determine the portion of each sales dollar that represents profit. $ Net Income $1,150 net income Sales $2,650 sales = = .434 or 43.4% $ • For every dollar of sales you make 43.4 cents of profit.

  10. Section 3 The Balance Sheet (con’t.) Chapter 9 $ Current Ratio • Relationship between current assets (Accts Rec., Cash in Bank, Merchandise Inventory) and current liabilities {Accts. Payables (Must be paid within the next accounting period.)}. $ $ Current Assets $ 37,775 Current Liabilities $11,725 = Current Ratio = 3.22 or 3.2:1 $ • This ratio indicates that a business is able to pay its debts, that business has current assets which are 3.2 times its current liabilities.

  11. Section 3 The Balance Sheet (con’t.) Chapter 9 Quick Ratio $ • The relationship between short term assets (can be quickly turned to cash) and current liabilities. $ Cash and Receivables $ 22,575 Current Liabilities $11,725 $ = Quick Ratio = 1.92:1 • If a business has a quick ratio of 1:1 or higher, the business has $1 in liquid assets for each $1 of its current liabilities. • In this case, the business has $1.92 in liquid assets per $1 in current liabilities. $

  12. Demonstration Problems Ch9 Problem 9-5 through 9-7 Missing 9-6 & 9-7

  13. Prime Printing Co. Worksheet For the Month ended June 30, 200- Prime Printing Co. Balance Sheet June 30, 200- Assets 4029.45 Cash in Bank 218.41 Accts. Receivable- Jack Dipolla 173.64 Accts. Receivable- Susan Hilloway Office Furniture 2432.17 Office Equipment 4106.80 8124.-- Automobile 19084.47 Total Assets Liabilities 1619.43 Accts. Payable – Fucini Corp. Accts. Payable – H&L Co. 2704.81 4324.24 Total Liabilities Owner’s Equity Wayne Kay, Capital 14760.23 Total Liabilities & O.E. 19084.47

  14. Extra Ratio Demo Problems

  15. Current Assets Current Liabilities 80,000 + 115,000 + 75,000 = 270,000 270,000 = 2.35 2.35:1 115,000 The business has current assets that are 2.35 times the liabilities.

  16. Cash and Receivables Current Liabilities 195,000 80,000 + 115,000 = 195,000 = 1.70 115,000 1.70:1 The business has $1.70 in liquid assets for each $1 in current liabilities.

  17. 190,000 Net Income = = .1439 =14.39% Net Sales 1,320,000 The percentage indicates that for each dollar of sales produced, 14.39 cents in profit.

  18. Section 1 Preparing the Work Sheet (con’t.) Chapter 8 $ Check Your Understanding p222 $ • Thinking Critically 1 & 2 • Problem 9-3 • Understanding Accounting Concepts and Procedures p224 $ $

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