Professional Documents
Culture Documents
Preparation: A Tutorial
Financial Statements
Financial Statements
Financial Statements
Financial Statements
Financial Statements
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Sales revenue
Cost of goods sold
Gross profit
Operating expenses
Income from operations
+/- Non-operating items
Income before taxes
Income taxes
Net income
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
Statement of Retained
Earnings
Statement of Retained
Earnings
The format of the statement is:
Statement of Retained
Earnings
The format of the statement is:
Beg. balance, retained earnings
+ Net income
- Dividends
End. balance, retained earnings
Statement of Retained
Earnings
Statement of Retained
Earnings
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet
Order of Preparation
Income
Statement
Net income
Statement of Retained
Earnings
Beginning Retained
Earnings
+ Net income
Dividends
Ending retained earnings
Balance Sheet
Ending Balance
Retained
Earnings
Review
Income statementA summary of the revenue
and expenses for a specific period of time.
Statement of retained earnings a summary
of the changes in the retained earnings that have
occurred during a specific period of time.
Balance sheetA list of the assets, liabilities,
and owners equity as of a specific date.
Example Problem
Cash
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
Step One
Assets
Cash
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
Assets, Liabilities,
Cash
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
5,000
Sales
100,000
Utility Expense
8,000
Buildings
65,000
Common Stock
45,000
Accounts Payable
12,000
Supplies
4,000
58,000
Interest Expense
5,000
Additional Paid in
Capital
20,000
Bonds Payable
40,000
Supplies Expense
3,000
Salaries Expense
16,000
Accounts Receivable
10,000
Inventories
45,000
Retained Earnings
30%
Step Two
Income Statement
Sales
- Cost of Goods Sold
100,000
-58,000
Gross Margin
42,000
- Operating Expenses
-27,000
Income from
Operations
15,000
- Non-operating Items
-5,000
10,000
- Income Taxes
-3,000
Net Income
7,000
Income Statement
Sales
- Cost of Goods Sold
100,000
-58,000
Gross Margin
42,000
- Operating Expenses
-27,000
Income from
Operations
15,000
- Non-operating Items
-5,000
10,000
- Income Taxes
-3,000
Net Income
7,000
Income Statement
Sales
- Cost of Goods Sold
100,000
-58,000
Gross Margin
42,000
- Operating Expenses
-27,000
Income from
Operations
15,000
- Non-operating Items
-5,000
10,000
- Income Taxes
-3,000
Net Income
7,000
Income Statement
Sales
- Cost of Goods Sold
100,000
-58,000
Gross Margin
42,000
- Operating Expenses
-27,000
Income from
Operations
15,000
- Non-operating Items
-5,000
10,000
- Income Taxes
-3,000
Net Income
7,000
Step Three
Statement of Retained
Earnings
Beginning Balance,
Retained Earnings
5,000
+ Net Income
+7,000
- Dividends
-0
Ending Balance,
Retained Earnings
12,000
Step Four
Current assets
+ Non-current assets
Total assets
Current liabilities
+ Long-term liabilities
+ Stockholders equity
Total liabilities and
stockholders equity
Balance Sheet
Current Assets:
Current Liabilities:
Cash
5,000
Accounts Payable
Accounts Receivable
10,000
Long-term
liabilities:
Inventories
45,000
Bonds Payable
Supplies
4,000
Stockholders
Equity:
Non-Current
Assets:
Buildings
Total Assets
65,000
129,000
12,000
40,000
Common Stock
45,000
Additional Paid in
Capital
20,000
Retained Earnings
12,000
Total Liabilities
and Equity
129,000
Balance Sheet
Current Assets:
Current Liabilities:
Cash
5,000
Accounts Payable
Accounts Receivable
10,000
Long-term
liabilities:
Inventories
45,000
Bonds Payable
Supplies
4,000
Stockholders
Equity:
Non-Current
Assets:
Buildings
Total Assets
65,000
129,000
12,000
40,000
Common Stock
45,000
Additional Paid in
Capital
20,000
Retained Earnings
12,000
Total Liabilities
and Equity
129,000
End. Bal. is
brought
forward from
the
Statement of
Retained
Earnings
The End