1. (GAAP) – Adequate Disclosure – When financial statements contain all information necessary to understand a business’ financial condition Lesson 8-1, page 179 REPORTING FINANCIAL INFORMATION Journals & General Ledgers are very detailed, making it difficult to step back and interpret ~Financial Statements summarize those details (GAAP) – Accounting Period Cycle – Changes in financial information are reported for a specific period of time in the form of financial statements (GAAP) – Matching Expenses with Revenue – Revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period Disclose – to make known; reveal or uncover: to disclose a secret.

2. INCOME STATEMENT vs. BALANCE SHEET Income Statements report financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss Balance Sheets report financial information on a specific date, indicating the financial condition of a business – the current balance Lesson 8-1,2, page 176,181

3. HEADING OF AN INCOME STATEMENT 1 3 2 3.Date of Report 1. Name of Company 2.Name of Report Lesson 8-1, page 176

4. INCOME STATEMENT INFORMATION ON A WORK SHEET Lesson 8-1, page 176 …no trial balance here….

5. LAYOUT OF AN INCOME STATEMENT Lesson 8-1, page 178 Amounts listed on Left Subtotals listed on Right Should match Work Sheet Not Debit & Credit columns

6. REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT 1.Write the name of the first section. 2.Write the title of the revenue account. 3.Record the balance of the account. 4.Write the name of the second section. 5.Write the title of each expense account. 5 1 3 4 2 10 8 9 7 1314 12 6.Record the balance of each account. 7.Rule a single line. 8.Write Total Expenses. 9.Record total expenses. 10.Calculate net income. 11.Rule a single line. 12.Write Net Income. 13.Record net income. 14.Same as work sheet? Rule double lines. 6 11 Lesson 8-1, page 177 What you brought in (Revenue) What you spent (Expenses) - = What you made (Net Income) Amounts Subtotals

7. COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT These Percentages allow businesses to compare its percentages to comparable businesses. If expenses are higher than “industry standards”, it may be wise to review spending practices. 3312÷4411 1099÷4411 Service Business acceptable industry percentage of Expenses: less than 80% Lesson 8-1, page 178 3312÷4411 =.750850147 =75.0850147 =75.08 – look to the 2 nd decimal place =75.1% – round to nearest tenth

8. INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS 3 1 5 4 2 3.Revenue Amounts 1. Revenue 4.Total of Sales 2.Account Titles 6 7 7.Record Net Loss 5. Total Sales 6.Net Loss Lesson 8-1, page 179 Parenthesis mean the number is a (negative) or a LOSS

9. ACCEPTABLEUNACCEPTABLE 23.7% Loss – we used all of our Sales dollars and then some on expenses; You’ll be out of business when you run out of personal money to keep it going! Service Business acceptable industry percentage of Expenses: less than 80%

10. Work Together 8-1 (p180 – wb157) & On Your Own 8-1 (p180 – wb158) Work Together 8-1 (p180 – wb157) & On Your Own 8-1 (p180 – wb158)

11. WT AmountsSubtotals 2181÷ 5511 3330÷5511

12. INCOME STATEMENT vs. BALANCE SHEET Income Statements report financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss Balance Sheets report financial information on a specific date, indicating the financial condition of a business – the current balance Lesson 8-1,2, page 176,181

13. BALANCE SHEET INFORMATION Lesson 8-2, page 181 but capital is funky We have to show the CURRENT Capital balance, which must be calculated…it is not current on the Work Sheet

14. HEADING OF A BALANCE SHEET Lesson 8-2, page 181 1 3 2 3.Date of Report 1. Name of Company 2.Name of Report Specific Date

15. ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET Lesson 8-2, page 182 51342 3.Asset Amounts 1. Assets 4.Liabilities 2.Account Titles 7.Single line 5. Account Titles 8.Total Liabilities 6.Liability Amounts 9.Total of Liabilities 6 7 89

16. FIGURING BALANCE SHEET CAPITAL Capital Account Balance Net Income Current Capital Drawing Account Balance $10,000$1,099$600$10,499 + + - - = = Lesson 8-2, page 183 Net Loss $1,099 - - $8,301

17. OWNER’S EQUITY SECTION OF A BALANCE SHEET Lesson 8-2, page 183 1.Owner’s Equity 2.Account Title 3.Capital Amount 4.Single Line 5.Total Assets 8 1 32 5 76 44 10 7.Total Liabilities and Owner’s Equity 8.Total of Liabilities and Owner’s Equity 9.Compare Totals 10.Double Lines 6.Total of Assets 99

18. OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET (preference) Lesson 8-2, page 184 1.Beginning Capital 2.Beginning Capital Amount 3.Net Income 4.Drawing 5.Single Line 8 1 3 2 57 64 7.Ending Capital 8.Current Capital Amount 9.Total Liabilities and Owner’s Equity 6.Difference 9

19. Work Together 8-2 (p185 – wb159) & On Your Own 8-2 (p185 – wb160) Work Together 8-2 (p185 – wb159) & On Your Own 8-2 (p185 – wb160)

20. WT 11,810 +1,899 -855 12,854 Capital :