LESSON 7-1 Preparing an Income Statement 6/10/2018 LESSON 7-1 page 180 Preparing an Income Statement

REPORTING FINANCIAL INFORMATION page 180 Adequate Disclosure – financial statements contain all information necessary to understand business condition Accounting Period Cycle – statements prepared each month of fiscal period Going Concern – financial statement prepared with the expectation that a business will remain in operation indefinitely Matching Expenses with Revenue – revenue and expenses reported in same fiscal period LESSON 7-1

INCOME STATEMENT INFORMATION ON A WORK SHEET page 182 LESSON 7-1

HEADING OF AN INCOME STATEMENT page 182 1 2 3 1. Center the name of the company on the first line. 2. Center the name of the report on the second line. 3. Center the date of the report on the third line. LESSON 7-1

REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT page 183 7 Single line 1 Revenue 2 Account title 3 Revenue amount 4 Expenses 5 Account titles 6 Expense amount 8 Total expenses 9 Total of expenses 11 Single line 13 Record net income 12 Net Income 14 Double lines 10 Calculate net income LESSON 7-1

COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT page 184 Component percentage – the relationship between one financial statement item and the total that includes that item. Divide all items in the last column by Total Sales Always round off one place after decimal point LESSON 7-1

COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT page 184 LESSON 7-1

INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS page 185 5 Total Revenue 1 Revenue 2 Account titles 3 Revenue amounts 4 Total of revenue 6 Net Loss 7 Record Net Loss LESSON 7-1

TERMS REVIEW page 186 stakeholders component percentage LESSON 7-1

LESSON 7-2 Balance Sheet Information on a Work Sheet 6/10/2018 LESSON 7-2 Balance Sheet Information on a Work Sheet

BALANCE SHEET Reports financial information ON A SPECIFIC DATE page 187 Reports financial information ON A SPECIFIC DATE Indicates its financial strength Adequate assets and few liabilities is a strong business LESSON 7-1

BALANCE SHEET page 187 LESSON 7-2

HEADING OF A BALANCE SHEET page 187 1 2 3 1. Center the name of the company on the first line. 2. Center the name of the report on the second line. 3. Center the date of the report on the third line. LESSON 7-2

ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188 6 Liability amounts 5 Account titles 1 Assets 4 Liabilities 2 Account titles 3 Asset amounts Single line 7 Total of liabilities 9 Total Liabilities 8 LESSON 7-2

OWNER’S EQUITY SECTION OF A BALANCE SHEET page 189 Current capital amount has to be calculated Capital + Net Income – Drawing Capital – Net Loss – Drawing LESSON 7-1

OWNER’S EQUITY SECTION OF A BALANCE SHEET page 189 1 Owner’s Equity 4 Single line 2 Account title 3 Capital amount 6 Total of assets 8 Total of Liabilities and Owner’s Equity 5 Total Assets 9 Compare totals 7 Total Liab. and Owner’s Eq. 10 Double lines LESSON 7-2

OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET page 190 3 Net Income 8 Current capital amount 1 Beginning capital 6 Difference 2 Beginning capital amount 4 Drawing 5 Single line Ending capital 7 9 Total Liabilities and Owner’s Equity LESSON 7-2