Financial Statements

Front 1

The financial statements are comprised of four basic reports, which are as follows:

Back 1

1. Income statement.

2. Balance sheet

3. Statement of cash flows.

4. Statement of retained earnings

Front 2

Income Statement

Back 2

Presents the revenues, expenses, and profits/losses generated during the reporting period. This is usually considered the most important of the financial statements, since it presents the operating results of an entity.

Front 3

Balance Sheet

Back 3

Presents the assets, liabilities, and equity of the entity as of the reporting date. Thus, the information presented is as of a specific point in time. The report format is structured so that the total of all assets equals the total of all liabilities and equity (known as the accounting equation). This is typically considered the second most important financial statement, since it provides information about the liquidity and capitalization of an organization.

Front 4

Statement of Stockholders Equity

Back 4

Common Stock and Retained Earnings

Then add Net income

And subtract Dividends

Front 5

Which accounts are permanent accounts?

Back 5

Assets

Liabilities

Stockholders Equity Account

All accounts that appear in the balance sheet, including Retained Earnings, are permanent accounts, and we carry forward their balances from period to period.

Front 6

Retained Earnings Balance

Back 6

Accounts that are debited are credited for retained earnings and accounts that are credited are debited for retained earnings

Front 7

Ending Retained Earnings

Back 7

Front 8

Accounting Cycle End of Period Balance

Back 8

Front 9

Post Closing Trial Balance

Back 9

Retained Earnings gets posted on Post Closing Trial Balance

Notice that the post-closing trial balance does not include any revenues, expenses, or dividends, because these accounts all have zero balances after closing entries. The balance of Retained Earnings has been updated from the adjusted trial balance to include all revenues, expenses, and dividends for the period.

Front 10

What are the Temporary Accounts?

Back 10

three accounts—revenues, expenses, and dividends—are termed temporary accounts: We keep them for each period and then transfer the balances of revenues, expenses, and dividends to the Retained Earnings account.

Front 11

What is the order of Assets in a balance sheet

Back 11

Cash

Accounts receivable

Prepaid supplies and rent

Long-term investments—investments in another company's debt or stock. We discuss long-term investments in debt and equity securities in Appendix D at the end of the book.

Property, plant, and equipment—long-term productive assets used in the normal course of business, such as land, buildings, equipment, and machinery. Eagle's purchase of equipment is an example of a purchase of property, plant, and equipment. We discuss property, plant, and equipment in Chapter 7.

Intangible assets—assets that lack physical substance but have long-term value to a company, such as patents, copyrights, franchises, and trademarks. We discuss intangible assets in Chapter 7.

Front 12

What is the order of Liabilities in a Balance?

Back 12

Accounts payable

Salaries payable

Utilities payable

Unearned revenue

Interest payable

Notes payable

Front 13

Prepaid Expense Adjust Entries

Back 13

. The adjusting entry for a prepaid expense always includes a debit to an expense account (increase an expense) and a credit to an asset account (decrease an asset).

Front 14

Prepaid Rent Adjusting Entries

Back 14

Front 15

Depreciable Entries

Back 15

24,000$ equipment with a guess of 60 months of use. The cost of the equipment for one month's use is $400 (= $24,000 × 1/60).

Front 16

Depreciable Entries Balance

Back 16

Front 17

Depreciation in Balance Sheet

Back 17

Front 18

Unearned revenues Adjusting Entries

Back 18

The adjusting entry for an unearned revenue always includes a debit to a liability account (decrease a liability) and a credit to a revenue account (increase a revenue).

Front 19

Unearned revenues Adjusting

Back 19

Front 20

Accrued Expenses

Back 20

accrued expense. The adjusting entry for an accrued expense always includes a debit to an expense account (increase an expense) and a credit to a liability account (increase a liability).

Front 21

Accrued Revenues

Back 21

The adjusting entry for an accrued revenue always includes a debit to an asset account (increase an asset) and a credit to a revenue account (increase a revenue).

Front 22

Which entries don't need adjusting entries?

Back 22

the sale of common stock,

is the payment of dividends to common stockholders.

Neither of these transactions involves the recognition of revenues or expenses and therefore will not require period-end adjusting entries.

(1) receive cash at the same time we earn revenue or

(2) pay cash at the same time we incur an expense will not require adjusting entries.

For example, when Eagle provides golf training to customers for cash [transaction (6)], the company records revenue at the same time it records the cash received, and no corresponding period-end adjusting entry is needed.

Front 23

How to get total stockholders equity on a balance sheet?

Back 23

Add all assets then subtract total liabilities

Front 24

How to find retained earnings on a balance sheet?

Back 24

Total stockholders equity minus common stock