chapter 3 t.hend alajaji. balance sheet income statement statement of cash flows statement of...

Reporting Financial results on Financial statements

Chapter 3

T.Hend Alajaji

Balance sheet

Income statement

Statement of cash flows

Statement of retrained earning

Financial statement :

Ch3

Financial Statemen

t

Balance Sheet

Transaction

Classified Balance

Sheet

Preparing Balance

Sheet

Income Statment

Classified income

statement

Preparing income

statement

Transaction

The types of events for transactions

Balance sheet

Classified Balance Sheet

Preparing a balance sheet

Objectives ( Balance Sheet ) :

Business activities that effect the basic

accounting equation A = L + SE

Are called Transactions

Transactions and other actives :

External exchanges : There are exchanges involving assets, liabilities and

stockholder equity that you can see between the company and someone .

Internal exchanges : these events do not involve exchanges with others

outside the business but rather occur within the company itself .

Transactions include two types of events :

Using the ending amount from each T-account

you could now prepare a balance sheet

Before do this , it’s good idea to check that

the accounting records are in balance by

determining whether debits = credit


Reports the amounts of assets , liabilities and stockholders equity of a business at a point in time .

Classified Balance Sheet : A balance sheet that shows a subtotal for

currents assets and current liabilities .

Balance sheet :

1. Current Assets Cash and other assets that are expected to be converted into cash, sold, or used up usually within a year or less, through the normal operations of the business, are called current assets.

Cash Accounts Receivable Notes Receivable are written promises by the customer to pay

the amount of the note and possibly interest at an agreed rate. Supplies. Prepaid expenses . Accrued revenues .


2- Fixed Assets Property, plant, and equipment (also called fixed assets or plant assets) include assets that depreciate over a period of time. Land is an exception, as it is not subject to depreciation.

Equipment Buildings Land


3- Current Liabilities Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.

Accounts payable Wages payable Interest payable Unearned fees


4- Long-Term Liabilities Liabilities not due for a long time (usually more than one year) are called long-term liabilities.

Short-term notes payable Mortgages payable Bonds payable


5- Owner’s Equity Owner’s equity is the

owner’s right to the assets of the business.

Owner’s equity is added to the total

liabilities, and this total must be equal to

the total assets.


Company NameBalance Sheet

DateAssets Liabilities

Current Assets Current LiabilitiesCash ………………………………………...

xx Accounts payable ……………………………

xx

Accounts Receivable ……………

xx Note payable ……………………………………

xx

Notes Receivable …………………

xx Wages payable …………………………………

xx

Supplies …………………………………

xx Interest payable ………………………………

xx

Prepaid Expenses……………………

xx Unearned fees …………………………………

xx

……………………Total current Assets

xx Total current Liabilities …………………

xx

Fixed Assets Long-Term LiabilitiesLand …………………………………………

xx Short-term notes payable ……………

xx

Equipment ………………………………

xx Mortgages payable …………………………

xx

Accum. Dep. – equipment ……

xx Bonds payable …………………………………

xx

Machinery ………………………………

xx Loans …………………………………………………

xx

Accum. Dep. – machinery ……

xx totalLong-Term Liabilities………… xx

Buildings …………………………………

xx

Accum. Dep. – Buildings ………

xx Owner’s Equity

Cars (automobile) …………………

xx Owner’s capital …………………………………

xx

Accum. Dep. – cars ………………

xx

Total fixed assets ………………

xx

Total assets ……………………………

xx Total Liabilities and Owner’s equity

xx

NetSolutionsBalance Sheet

December 31, 2011Assets Liabilities

Current Assets Current LiabilitiesCash 2,065 Accounts payable 900

Accounts Receivable 2,720 Wages payable 250

Supplies 760 Unearned rent 240

Prepaid insurance 2,200 Total current Liabilities 1,390Total current assets 7,745Fixed Assets Owner’s EquityLand 20,00

0Chris clark, capital 28,10

5Equipment 1,800Accum. Dep. - equipment

(50)

Total fixed assets 21,750

Total assets 29,495

Total Liabilities and Owner’s equity

29,495

complete the following table .

Indicate whether the account is classified as

Current assets , noncurrent assets , current

liabilities , noncurrent liabilities , or stockholder

equity and whether the account usually has a

debt or credit balance .

Exercise 1 :

Debit or Credit Balance

Balance sheet Classification

Account

Land

Retained Earning

Notes payable (due in three years )Accounts Receivable

Supplies

Equipment

Accounts Payable

Cash

Taxes payable

EXERCISE 2: complete the following table

Balance SheetDecember 31, 2011

Assets LiabilitiesCurrent Assets Current LiabilitiesCash 1000 Accounts payable 3000Accounts Receivable 500 Wages payable 1500Supplies 2500 Unearned rent 1000Prepaid insurance 3000 Total current LiabilitiesTotal current assetsFixed Assets Owner’s EquityLand 5000 Chris clark, capital 8000Equipment 2000Accum. Dep. - equipment (500)Total fixed assetsTotal assets Total Liabilities and

Owner’s equity

EXERCISE 3 :

3000 land 3000 Cash

5000 Supplies 5000 Accounts Receivable

7000 Accounts Payable 4000 Inventory

8000 Note payable ( due 2013)

2000 Notes receivable ( due 2013)

5000 Retained Earning 2500 Equipment

4000 Loans 500 Accum. Dep. – equipment

• From the following table prepare a classified Balance sheet at December 31 2013

P r e p a r i n g a I n c o m e S t a t e m e n t

Income Statement . The Three main sections of income

statement. Accounting Methods Preparing Income Statement .

Objectives :

It called also the statement of operations . It is reports the amount of revenues less expenses for

a period of time . The income Statement summarize the financial impact

of operating actives under taken by the company during the accounting period .

A financial statement that measures a company's financial performance over a specific accounting period.

Income Statement

1- Revenues . Amounts earned by selling goods or

services . 2- Expenses .Costs of business necessary to earn

revenues 3- Net income .The excess of revenues over expenses

Income Statement include three main sections :

Company NameIncome Statement

For The Period Ended (Date)

Revenues ……………………………………………………………

xxx

Total Revenues ………………………………………………… xxx

Expenses ……………………………………………………………

xxx

Total expenses ………………………………………………… (xxx)

Net income (or net loss) ……………………………… xxx

Expenses+Assets=Liabi l it ies+Capital+Revenues

Credit AccountsIf Credit, and if Debit

Debit AccountsIf Debit, and if Credit

Decrease Increase Item

Revenues

Expenses

1- Cash Basis Accounting : Reports revenues when cash is received

and expenses when cash is paid .

2- Accrual Basis Accounting : Reports revenues when they are earned

and expenses are incurred regardless of the timing of cash receipts

Accounting Methods:

The requirement under accrual basis

accounting to record expenses in the same

period as the revenues they generate not

necessarily the period in which cash is paid

for them .

Matching Principle :

Expense

Revenues

NetsolutionsIncome Statement

For The Year Ended December 31, 2011

Fees earned ………………………………………………………

16,840

Rent revenue ……………………………………………………

120

Total revenues ……………………………………… 16,960Expenses:Wages expense …………………………………… 4,525Supplies expense ……………………………………

2,040

Rent expense ………………………………………… 1,600Utilities expense …………………………………… 985Insurance expense ……………………………… 200Depreciation expense ………………………... 50Miscellaneous expense ………………………… 455

Total expenses ………………………… 9,855Net income ………………………………………………………

7,105

Complete the following table by entering either debts or credit in each cell :

Exercise 1 :

Decrease Increase Item

Revenues

Expenses

Company Name : Alaml Company Income Statement

For The Period Ended (December 31 2013 )

Revenues ……………………………………………………………

8000

Total Revenues …………………………………………………

Expenses ……………………………………………………………

3000

Total expenses ………………………………………………… ( )

Net income (or net loss) ………………………………

EXERCISE 2 : Complete the following :

Exercise 3 :

Items

10000 Passenger ticket Revenues

8000 Onboard Revenues

1000 Ship expenses

1500 Selling expenses

4000 Wage expenses

1500 Income tax Expenses

From the following table prepare a Income statement at December 31 2013

Objectives ( statement of cash flow) :

BUSINESS ACTIVITIES AND CASH

FLOWS

Classifying Cash Flows

OperationsCash received and paidfor day-to-day activities

with customers, suppliers,

and employees.

InvestingCash paid and received

from buying and selling

long-term assets .

FinancingCash received and paid

for exchanges withlenders and stockholders.

Business Activities and Cash Flows

The Statement of Cash Flows focuses

attention on :

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CashChecking and Savings Accounts

Cash EquivalentsHighly liquid short-term

investmentswithin three months of

maturity.

Business Activities and Cash Flows

Currency

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Classifying Cash Flows

(in millions)Net cash provided (used) by Operating Activities 79$ Net cash provided (used) by Investing Activities (38) Net cash provided (used) by Financing activities 21

Net change in Cash and Cash Equivalents 62 Cash and Cash Equivalents, beginning of year 40

Cash and Cash Equivalents, end of year 102$

Condensed Statement of Cash flowsUNDER ARMOUR, INC

For the Year Ended December 31, 2008

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Cash inflows and outflows that directly relate to revenues and expenses reported on the

income statement.

Operating Activities

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Investing Activities

Under Armour’s 2008 Investing Activities

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Financing Activities

Under Armour’s 2008 Financing Activities

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E12-7 Preparing and Evaluating a Simple Statement of Cash Flows

)Indirect Method(Required:

2 .Prepare a statement of cash flows using the indirect method.

Cash Flows from Operating Activities:Net Income 70$ Add Depreciation 35Subtract Accounts Receivable increase (100)Add Inventory decrease 125Add Wages Payable increase 40Net cash provided (used) by operating activities 170

Statement of Cash flowsGoggle Company


Current Assets Current LiabilitiesSubtract from Add tonet income. net income.

Add to Subtract fromnet income. net income.

Increase

Decrease


Cash Flows from Investing Activities:Equipment purchased (60) Net cash provided (used) by investing activities (60)




Cash Flows from Investing Activities:Equipment purchased (60) Net cash provided (used) by investing activities (60)

Cash Flows from Financing Activities:Obtained long-term bank loan 60 Net cash provided (used) by financing activities 60

Net change in cash 170 Cash, Beginning of 2010 35 Cash, End of 2010 205$



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chapter 3 t.hend alajaji. balance sheet income statement statement of cash flows statement of...

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