Chapter 26 Financial Statements and End-of- Fiscal-Period Entries for a Corporation

Financial Statements for a Corporation Income Statement Statement of Stockholders’ Equity Balance Sheet

Income Statement Reports the financial progress of a business during a fiscal period. Contains: Revenue Cost of Merchandise Sold Gross Profit on Operations Operating Expenses Net Income or Net Loss

Statement of Stockholders’ Equity Shows changes in a corporation’s ownership for a fiscal period. Contains: Capital Stock Retained Earnings

Balance Sheet Reports assets, liabilities, and stockholders’ equity on a specific date. Can be used to determine the financial strength of a business.

Classifying Assets Assets are classified into two categories and are based on the length of time the assets will be in used: Current Assets – Examples would be cash, accounts receivable, merchandise inventory, supplies, and prepaid insurance Plant Assets – Examples would be cash registers, computers, and display cases.

Book Value The difference between an asset’s account balance and its related contra account balance. Our company will be reporting three contra accounts: Allowance for Uncollectible Accounts Accumulated Depreciation-Office Equipment Accumulated Depreciation-Store Equipment

Classifying Liabilities Liabilities are classified according to the length of time until they are due. Current liabilities are due within one year. Long-term liabilities are owed for more than a year. An example: Mortgage Payable.

Analyzing a Balance Sheet Two analyses are used to evaluate the financial strength: Working Capital – the amount of total current assets less total current liabilities. Current Ratio – a ratio that shows the numeric relationship of current assets to current liabilities.

Adjusting, Closing, and Reversing Entries for a Corporation Adjustments are similar to those for proprietorships and partnerships, with the exception of federal income tax. Closing Entries are made from information in a work sheet. Reversing Entries are recorded when adjusting entries create a balance in an asset or liability account.