> > > > Understanding Financial Statements

Balance Sheet What is a Balance Sheet? A statement that shows –(1) How much money a company has –(2) How much money a company owes –(3) How much the company is worth (value of company) Follows the accounting equation Assets = Liabilities + Owner’s Equity

Sample Balance Sheet

Label the Balance Sheet

1. Company Name Balance Sheet Date

Label the Balance Sheet 1. Company Name Balance Sheet Date 2. Total Assets – how much you have

Label the Balance Sheet 1. Company Name Balance Sheet Date 2. Total Assets – how much you have 3. Total Liabilities – how much you owe

Label the Balance Sheet 1. Company Name Balance Sheet Date 2. Total Assets – how much you have 3. Total Liabilities – how much you owe 4. Owner’s Equity– how much you are worth

You make $400 (after taxes) and you owe $275 in bills. What is your worth? $400 (asset) - $275 (liability)= $125 (worth) C heck Point….

Income Statement What is an Income Statement? A statement that shows a company’s profit. How much was sold or made? ( revenue) How much was spent? (expense) How much is left over? (net income/profit) Revenue – Expenses = Net Income/Loss

Sample Income Statement

Label the Income Statement 1. Company Name Income Statement Date

Sample Income Statement 1. Company Name Income Statement Date 2. Total Revenue - how much was sold

Sample Income Statement 1. Company Name Income Statement Date 2. Total Revenue - how much was sold 3. Total Expenses - how much was spent

Sample Income Statement 1. Company Name Income Statement Date 2. Total Revenue - how much was sold 3. Total Expenses - how much was spent 4. Net Income/Loss- how much profit

You have $5000 in sales Your company had $1200 in expenses Did you have a Net Income or Loss? What was the amount? Revenue $5000 – Expenses $1200 = Net Income $3800 C heck Point….

Look at the Balance Sheet and Income Statements for Companies 1, 2 and 3. Answer the questions Do HO#2

Review…. What accounts would you find listed on the balance sheet? Assets Liabilities Owner’s Equity

Review…. What is the term used for how much you owe? Liability

Review…. How do you calculate how much you are worth? Assets – Liabilities = Owner’s Equity (worth)

Review…. What financial statement shows how much profit you made and how is this calculated? Income Statement Revenue - Expenses