P AN INCOME S TATEMENT
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FINANCIAL STATEMENTS FOR A PROPRIETORSHIP Chapter 7, Section 2
Transcript of P AN INCOME S TATEMENT
FINANCIAL STATEMENTS
FOR A PROPRIETORSHIP Chapter 7, Section 2
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
3. Date of Report—Notice it is a period of time, not a single date!
1. Name of Company
2. Name of Report
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 headings 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.
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1 3
4 2
11 8 9 7
13 14 12
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.
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10
RATIO ANALYSIS
Percentage relationship between one financial
statement item and the total that includes that item
Return on Sales (based on net sales)
Net Income or Loss ÷ Net sales
WRITE THIS NEXT RATIO IN A BLANK SPACE
ON YOUR NOTES—THERE IS NOT A PRINTED
PLACE FOR IT!
Current Ratio (based on current assets & liabilities)
Current assets (cash, AR, supplies) ÷ liabilities
COMPLETED INCOME STATEMENT
INCOME STATEMENT WITH TWO REVENUE
ACCOUNTS AND A NET LOSS
THE STATEMENT OF CHANGES IN
OWNER’S EQUITY
Owner, Capital is the only account recorded in
the owner’s equity section of the balance sheet. Must do a calculation to obtain this amount
Beginning Capital Account Balance (from ledger)
+ Investments (from ledger)
+ Net Income (from Income Statement)
– Drawing Account Balance (from worksheet)
– Net Loss (from Income Statement)
= Ending Capital Account Balance
Notice this amount
does not come from the
worksheet! It comes
from the beginning
date in the ledger
account
Notice this amount
is not the same as
on the worksheet!
This amount will
be used on the
Balance Sheet.
This amount
also comes
from the ledger This amount
does come from
the bottom of the
worksheet.
BALANCE SHEET
Shows financial condition on a specific date
Includes assets, liabilities, owner’s equity
Data obtained from Balance Sheet columns of the
worksheet
PREPARING A BALANCE SHEET
PREPARING A
BALANCE SHEET
PREPARING A BALANCE SHEET (CONT.)
Sections include:
Assets
Liabilities
Owner’s Equity
Section headings are written in the center
Account titles are written at the left
STEPS TO PREPARE THE BALANCE SHEET
Assets & Liabilities Section
1. Asset Heading
2. Asset Accounts
3. Asset Amounts
4. Total Assets
5. Write the asset Total
6. Liabilities Heading
7. Liability Accounts
8. Liability Amounts
9. Total Liabilities
Owner’s Equity Section
1. Owner’s Equity Title
2. Account Title
3. Capital Amount (FROM STATEMENT OF OWNER’S EQUITY, NOT THE WORKSHEET!
4. Single Line
5. Total Assets (this is already done)
6. Write the total (this is already done)
7. Total Liabilities & Owner’s Equity
8. Write the total of the liabilities and capital account
9. Compare total with Asset Total
10. Double Underlines under asset total and total liabilities and Owner’s Equity total
Note the Balance Sheet image in your
notes looks different from the Balance
sheet in the PowerPoint. There are two
different formats for the Balance Sheet.
Connect problems will use the format
shown in the PowerPoint Presentation.
