© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin Name of entity 2. Title of statement 3. Specific date 4. Unit of measure The Balance Sheet reports the financial position of an entity at a particular point in time.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-2 Use $ on the first item in a group and on the group total. Assets = Liabilities + Stockholders’ Equity
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin Name of entity 2. Title of statement 3. Specific date (Unlike the balance sheet, this statement covers a specified period of time.) 4. Unit of measure
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-4 The Income Statement reports the revenues less expenses of the accounting period.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-5 Revenues June 2014 Cash from sale collected on June 10th. X May 2014 $1,000 sale made on May 25th. X When will the revenue from this transaction be recognized? Earnings from the sale of goods or services.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-6 Revenue May 2014 $1,000 revenue recognized in May June 2014 When will the revenue from this transaction be recognized? Earnings from the sale of goods or services.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-7 Expenses May 2014June 2014 May 11 paid $75 cash for newspaper ad. X Ad appears on June 8th. X The dollar amount of resources used up by the entity to earn revenues during a period. When will the expense for this transaction be recognized?
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-8 Expenses May 2014June 2014 Advertising expense recorded in June. The dollar amount of resources used up by the entity to earn revenues during a period. When will the expense for this transaction be recognized?
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin Name of entity 2. Title of statement 3. Specific date (Like the income statement, this statement covers a specified period of time.) 4. Unit of measure
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-10 The Statement of Retained Earnings reports the way that net income and the distribution of dividends affect the financial position of the company during a period.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin Name of entity 2. Title of statement 3. Specific date (Like the income statement and statement of retained earnings, this statement covers a specified period of time.) 4. Unit of measure
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-12 The Statement of Cash Flows reports the inflows and outflows of cash during the period in the categories of operating, investing, and financing.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-13 Relationship Among the Financial Statements Net income from the income statement increases ending retained earnings on the statement of retained earnings.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-14 Relationship Among the Financial Statements Ending retained earnings from the statement of retained earnings is one of the components of stockholders’ equity on the balance sheet.
© 2004 The McGraw-Hill Companies McGraw-Hill/Irwin 1-15 Relationship Among the Financial Statements The change in cash on the statement of cash flows added to the beginning of the year balance in cash equals the ending balance in cash on the balance sheet.