managerial accounting structure of financial statements
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Managerial Accounting Managerial Accounting
Structure of Financial StatementsStructure of Financial Statements
Topic CoverageTopic Coverage1. Consolidated balance sheet2. Consolidated income statement3. Consolidated cash flow statement4. Monthly cash flow statement and LOC needs5. Linkages between financial statements6. Self test of statement linkage understanding
Basic Structure of the Basic Structure of the Balance SheetBalance Sheet
Assets: Liabilities and Net Worth:
Current assets Current liabilities
plus Intermediate assets plus Intermediate liabilities
plus Long term assets plus long term liabilities
plus Net worth
equals Total assets equals Total liabilities and net worth
Assets: Liabilities and Net Worth:
Current assets Current liabilities
plus Intermediate assets plus Intermediate liabilities
plus Long term assets plus long term liabilities
plus Net worth
equals Total assets equals Total liabilities and net worth
Often referred to as equity
Often referred to as equity
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Current Asset SegmentCurrent Asset Segment
Current assets:
Cash _________Savings and time deposits _________Marketable securities _________Accounts receivable _________Short term notes receivable _________Unsold production inventories _________Supplies on hand _________Prepaid expenses _________Other Total current assets _________
Non-Current Asset SegmentNon-Current Asset Segment
Intermediate assets:
Intermediate notes receivable __________Equipment __________Machinery and motor vehicles __________Other intermediate assets Total intermediate assets__________
Long term assets:
Long term notes receivable __________Buildings and other structures __________Land __________Other long term assets Total long term assets __________
Current Liabilities SegmentCurrent Liabilities Segment
Current liabilities
Accounts payable __________Short term notes payable __________Current payment on term loans __________Accrued interest __________Accrued taxes __________Accrued rents and leases __________Contingent tax on current assets Total current liabilities __________
Non-Current Liabilities SegmentNon-Current Liabilities SegmentIntermediate liabilities
Intermediate notes less current payment __________Sales contract less current payment __________Contingent tax in intermediate assets __________Other Total intermediate liabilities __________
Long term liabilities
Mortgages less current payments __________Land contracts less current payment __________Contingent liability on long term assets __________Other Total long term liabilities __________
Basic Structure Basic Structure of Income Statementof Income Statement
Cash receipts from product salesMinus Operating expensesEquals Net cash income from operationsPlus Gain (loss) on sale of intermediate and long term assetsPlus Cash subsidies receivedEquals Income (loss) before taxes and extraordinary itemsMinus Provision for income taxesEquals Income before extraordinary itemsPlus Extraordinary itemsEquals Net cash income
Cash receipts from product salesMinus Operating expensesEquals Net cash income from operationsPlus Gain (loss) on sale of intermediate and long term assetsPlus Cash subsidies receivedEquals Income (loss) before taxes and extraordinary itemsMinus Provision for income taxesEquals Income before extraordinary itemsPlus Extraordinary itemsEquals Net cash income
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Basic Structure of Basic Structure of Cash Flow StatementCash Flow Statement
Cash availableMinus Cash requiredEquals Cash available less cash requiredPlus Savings withdrawalsEquals Cash positionPlus Net borrowingMinus Other uses of cashMinus Additions to savingsEquals Ending cash balance
Cash availableMinus Cash requiredEquals Cash available less cash requiredPlus Savings withdrawalsEquals Cash positionPlus Net borrowingMinus Other uses of cashMinus Additions to savingsEquals Ending cash balance
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Cash Available SegmentCash Available SegmentCash available
Beginning cash balance __________Cash receipts from product sales __________Net gain on sale of assets __________Cash subsidies received __________Other cash available Total cash available __________
Cash Required SegmentCash Required Segment
Cash required
Cash operating expenses __________Income and property tax payments __________Insurance policy payments __________Current payment on operating loansCurrent payment on intermediate loans __________Current payment on long term loans __________Capital expenditures __________Other cash required Total cash required __________
Annual Ending Cash BalanceAnnual Ending Cash Balance
Cash available minuscash required + Savings withdrawal $0= Cash position + New borrowing: $0 Intermediate term loans $0 Long term loans $0 Short term loans $0 Total new borrowing - Other uses of cash: $0 Short term loan payments: $0 Interest payments $0 Principal payments $0 Additions to saving $0 = Ending cash
$0
$0
$0
$0
Monthly Cash AvailableMonthly Cash Available
January February March ……..Cash available
Beginning cash balance ______ ______ ______Cash receipts from product sales ______ ______ ______Net gain on sale of assets ______ ______ ______Cash subsidies received ______ ______ ______Other cash available Total cash available ______ ______ ______
Monthly Cash RequiredMonthly Cash Required
January February March ……..Cash required
Cash operating expenses ______ ______ ______Income and property tax payments ______ ______ ______ Insurance policy payments ______ ______ ______Current payment on operating loans ______ ______ ______Current payment on intermediate loans ______ ______ ______ Current payment on long term loans ______ ______ ______ Capital expenditures ______ ______ ______ Other cash required Total cash required ______ ______ ______
Monthly Cash PositionMonthly Cash Position January February March ……..
Cash available ______ ______ ______Cash required ______ ______ ______Savings withdrawalCash position ______ ______ ______
Indicates monthly cash flowsurpluses or deficits beforeborrowing on a Line of Creditor LOC…
Indicates monthly cash flowsurpluses or deficits beforeborrowing on a Line of Creditor LOC…
Monthly and Annual Monthly and Annual BalancesBalances
November December Year
Total debt outstanding
Operating loan balance
Intermediate term loan balance
Long term loan balance
Accrued interest
$0 Operating loans
$0 Intermediate term loans
Long term loans
Cash position
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0$0
$0
$0 $0
$0 $0 $0
$0 $0 $0
Ending cash balanceEnding cash balance
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalliabilities Equity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
2007 Cash Flow StatementSources of cash:Beginning cash balanceCash receipts from product salesOther sources of cash Total sources of cash
Uses of cash:Cash operating expensesInterest paymentsPrincipal paymentsCapital expendituresWithdrawals of cashOther selected uses of cashEnding cash balance Total uses of cash
Basic structure:Total sources = total uses
2007 Income StatementCash receipts from product salesOther income Total income
Cash operating expensesInterest paymentsOther cash expensesDepreciation Total expenses
Net income from operationsAllowance for taxes Net income
Basic structure:EBIT = total income – total expenses + interest payments
Interrelationships Between Financial Statements
Balance Sheet 12/31/07Ending cash balanceOther current assets Total current assets
Machinery and equipmentBuildings and improvementsLand Total assets
Accounts payable Current loan paymentAllowance for taxesOther current liabilities Total current liabilities
Remaining balance on loans Total liabilities
Equity
Basic Structure:Equity = total assets – totalLiabilitiesEquity = Retained net Income + asset revaluations
Other statements and schedules:Statement of Change in Owner EquityDepreciable asset schedules
Sample QuestionSample Question
What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?
Sample QuestionSample Question
What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?
Current assets
Current assets
Current liabilities
Current liabilities
Sample QuestionSample Question
What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?
Total assets
Total assets
Total liabilities
Total liabilities
Sample QuestionSample Question
What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?What is this firm’s net income and equity?
Variable expenses
Variable expenses
Fixed expenses
Fixed expenses
Calculation of equityCalculation of equity:Total current assets = 10,000 + 11,000 + 22,000 = 43,000Total current liabilities = 1,200 + 7,500 + 7,213 = 15,913Total assets = total current assets + 76,500 +14,000 + 99,500 = 233,000Total liabilities = total current liabilities + 29,500 + 1,200 = 46,613Equity = 233,000 – 46,613 = 186,387
Calculation of equityCalculation of equity:Total current assets = 10,000 + 11,000 + 22,000 = 43,000Total current liabilities = 1,200 + 7,500 + 7,213 = 15,913Total assets = total current assets + 76,500 +14,000 + 99,500 = 233,000Total liabilities = total current liabilities + 29,500 + 1,200 = 46,613Equity = 233,000 – 46,613 = 186,387
Calculation of net incomeCalculation of net income:Cash receipts from product sales = 73,000Total operating expenses = 51,200 + 2,500 + 7,400 = 61,100Net income from operations = 73,000 – 61,100 = 11,900Net income before taxes = 11,900Net income = 11,900 – 7,213 = 4,687Net cash income = 4,687 + 7,400 = 12,087