Balance Sheet Income Statement Owner’s Equity Statement.
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Post on 03-Jan-2016
<ul><li><p>Balance SheetIncome StatementOwners Equity Statement.</p></li><li><p>The Balance Sheet and the Income Statement are financial statementsBalance Sheet: Details the condition of the business on a specific dateIncome Statement: Details revenue and expense transactions over a specific timeBalance Sheet: Assets, Liabilities and Owners EquityProvides a snapshot of the financial condition of a business at a given point in time.Remember - Accounting Equation must always be in balance. Assets = Liabilities + Owners Equity (Owners Equity represents the Net Worth of the owner). </p></li><li><p>Income Statement: Revenues & ExpensesProvides information related to the amount of Revenues and Expenses incurred for a given period of time (fiscal period).One month in the case of the sample case(Revenue minus Expenses = Net Income (profit) or Net Loss)Question: Who is interested in reviewing these financial statements and why?Financial statements are often reviewed by and distributed to:Owners, Creditors, Investors, Managers, and sometimes Customers.Should always be presented in a professional format.</p></li><li><p>Use the completed eight-column worksheet to prepare the Balance Sheet and Income StatementSee completed Balance Sheet & Income Statement solutions</p></li><li><p>Reflects the changes to the equity in the business over a given period of time.Essential elements, Capital balance from the beginning of the fiscal periodAdd Net Income (subtract a loss)Subtract withdrawals made by the ownerAdd additional investments made by the owner</p></li><li><p>Use the completed eight-column worksheet to prepare the Owners Equity StatementSee completed Owners Equity Statement solutions</p></li><li><p>Review the completed financial statements.Is this business a good candidate for a business loan?Why / why not?Would you invest your savings into this business?What else needs to be known?Determine missing transactions not accounted for.Discuss Vertical and Horizontal analysis.Vertical: Each amount on a financial statement as a percentage of another item. Allows comparison to other businesses.Horizontal: Compares financial statements across fiscal periods. Is also referred to as Trend Analysis.</p></li><li><p>Understanding the basics of double entry accounting will help you with future entrepreneurial plans or business projects. We hope this project enables you with a better grasp of financial management the backbone of any effective business plan.</p><p>The End</p></li></ul>
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