Chapter 7 Financial Statements

7.1 Income Statement Component percentage – the percentage relationship between one financial statement item and the total that includes that item

Accounting Concept: Adequate Disclosure – accounting concept when financial statements contain all information necessary to understand a business’s financial condition Going Concern – accounting concept when financial statements are prepared with the expectation that a business will remain in operation indefinitely

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

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 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

7.2 Balance Sheet Stakeholder – any person or group who will be affected by an action

LESSON 7-2 2/17/2019 BALANCE SHEET page 187 LESSON 7-2 GREEN

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 1 Owner’s Equity 4 Single line 2 Account title 3 Capital amount - calculated 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