F INANCIAL S TATEMENTS FOR A P ROPRIETORSHIP Chapter 7, Section 2

R EVIEW A CCOUNTING C ONCEPTS CONCEPT: Adequate Disclosure Financial statements contain all information necessary to understand a business’s financial condition. CONCEPT: Accounting Period Cycle Financial statements are always prepared at the end of the fiscal period. CONCEPT: Matching Expenses with Revenue The revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period.

B ALANCE S HEET Shows financial condition on a specific date Includes assets, liabilities, owner’s equity Data obtained from Balance Sheet columns of the worksheet

P REPARING A B ALANCE S HEET Heading 3.Date of Report – just write the date not “For period ended…” 1. Name of Company 2.Name of Report 1 2 3

P REPARING A B ALANCE S HEET ( CONT.) Sections include: Assets Liabilities Owner’s Equity Section headings are written in the center Account titles are written at the left

P REPARING A B ALANCE SHEET ( CONT.) 4 Liabilities 1 Assets Total Liabilities 8 2 Account titles 3 Asset amounts Single line 7 6 Liability amounts 5 Account titles Total of liabilities 9

P REPARING A B ALANCE SHEET ( CONT.) Owner, Capital is the only account recorded in the owner’s equity section of the balance sheet. Must do a calculation to obtain this amount Beginning Capital Account Balance (from worksheet) + Net Income (– Net Loss) – Drawing Account Balance (from worksheet) = Current (Ending) Capital Account Balance

P REPARING A B ALANCE S HEET ( CONT.) 7 Total Liab. and Owner’s Eq.5 Total Assets 1 Owner’s Equity 2 Account title 3 Capital amount 6 Total of assets 8 Total of Liabilities and Owner’s Equity 9 Compare totals 10 Double lines Single line 4