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Financial Statements and Closing Procedures Section 1: Preparing the Financial Statements Chapter 13 Section Objectives 1.Prepare a classified income statement from the worksheet. 2.Prepare a statement of owner’s equity from the worksheet. 3.Prepare a classified balance sheet from the worksheet. McGraw-Hill© 2007 The McGraw-Hill Companies, Inc. All rights reserved.

13-50 The Classified Balance Sheet

13-51 Objective 3 Prepare a classified balance sheet from the worksheet.

13-52 Current Assets

13-53 Current assets are assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year. ANSWER: QUESTION: What are current assets?

13-54 Current Assets Current assets are usually listed in order of liquidity.

13-55 Liquidity is the ease with which an item can be converted into cash. ANSWER: QUESTION: What is liquidity?

13-56 Current Assets Current assets for Simpson Antiques

13-57 Plant and Equipment

13-58 Plant and equipment is property that will be used in the business for longer than one year. ANSWER: QUESTION: What is plant and equipment?

13-59 Noncurrent assets are called long-term assets. An important category of long-term assets is plant and equipment. For many businesses plant and equipment represents a sizable investment. Plant and Equipment

13-60 Plant and Equipment The balance sheet shows three amounts for each category of plant and equipment : (Accumulated depreciation) Book value Asset

13-61 Plant and Equipment Total plant and equipment

13-62 Current Liabilities

13-63 Current liabilities are d ebts that must be paid within one year. ANSWER: QUESTION: What are current liabilities?

13-64 Current liabilities are usually listed in order of priority of payment. Management must ensure that funds are available to pay current liabilities when they become due in order to maintain the firm's good credit reputation. Current Liabilities

13-65 Current Liabilities Total current liabilities

13-66 Long-Term Liabilities

13-67 Long-term liabilities are debts of a business that are due more than one year in the future. ANSWER: QUESTION: What are long-term liabilities?

13-68 Although repayment of long-term liabilities might not be due for several years, management must make sure that periodic interest is paid promptly. Long-term liabilities include mortgages, notes payable, and loans payable. Long-Term Liabilities

13-69 Owner's Equity

13-70 Owner's Equity Simpson Antiques prepares a separate statement of owner's equity that reports all information about changes that occurred in the owner's financial interest during the period.

13-71 Owner's Equity The ending balance from the statement of owner’s equity is transferred to the Owner's Equity section of the balance sheet.

REVIEWREVIEW A classified income statement is also called a(n) ___________________________. ___________ is the difference between net sales and the cost of goods sold. _____________ are assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year. Current assets Gross profit multiple-step income statement Complete the following sentences: SECTION

REVIEWREVIEW _______________ are debts that must be paid within one year. ________ is the ease with which an item can be converted into cash. _________________ are debts of a business that are due more than one year in the future. Long-term liabilities Complete the following sentences: Current liabilities Liquidity SECTION

13-74 Thank You for using College Accounting, 11th Edition Price Haddock Brock