1. 10-1 FINANCIAL STATEMENTS CHAPTER 9

2. 10-2 Work sheet For large companies, if the financial statements are prepared directly from the adjusted trial balance, errors are very difficult to occur. As a result, a work sheet is essential.

3. 10-3 George Ross Photocopy Agency Work Sheet March 31, 2004 Account name Trial BalanceAdjustmentsAdjusted Trial Balance Income Statement Balance Sheet DebitCreditDebitCreditDebitCreditDebitCreditDebitCredit Cash Accounts Receivable Photocopy Supplies Office Supplies Prepaid Rent Prepaid Insurance Photocopy Equipment Accumulated Depreciation, Photocopy Equipment Office Equipment $9,590 6,000 2,300 800 4,800 600 2,000 5,300 $500 300 400 50 33 $9,590 6,000 1,800 500 4,400 550 2,000 5,300 $33 $ 9,590 6,000 1,800 500 4,400 550 2,000 5,300 $33

4. 10-4 George Ross Photocopy Agency Work Sheet March 31, 2004 Account name Trial BalanceAdjustmentsAdjusted Trial Balance Income Statement Balance Sheet DebitCreditDebitCreditDebitCreditDebitCreditDebitCredit Accumulated Depreciation, Office Equipment Accounts Payable Unearned Photocopy Fees George Ross, Capital George Ross, Withdrawals Photocopy Fees Earned Office Wages Expense Utility Expense Telephone Expense 980 1,100 230 120 33820 $3,120 1,300 20,000 9,900 33820 $500 88 980 1,100 230 120 88 3,120 800 20,000 9,900 1,100 230 120 9,900 980 88 3,120 800 20,000

5. 10-5 George Ross Photocopy Agency Work Sheet March 31, 2004 Account name Trial BalanceAdjustmentsAdjusted Trial Balance Income Statement Balance Sheet DebitCreditDebitCreditDebitCreditDebitCreditDebitCredit Rent Expense Insurance Expense Photocopy Supplies Expense Office Supplies Expense Depreciation Expense, Photocopy Equipment Depreciation Expense, Office Equipment Net Income 400 50 500 300 33 88 1871 1871 400 50 500 300 33 88 33,941 400 50 500 300 33 88 2821 7,0799,900 $ 9,590 6,000 1,800 500 4,400 550 2,000 31,12024,041 7,079

6. 10-6 Financial Statement Private individuals Non-profit organizations Retailers Wholesalers Service industries Financial Statement Draw up Financial statements are used by management, investors, creditors and government regulatory agencies. It can be used as a guide for your business activities.

7. 10-7 Income Statement Income Statement is known also as the profit and loss statement. Income Statement shows all income and expense accounts over a period of time. Income statements are used to track revenues and expenses so that you can determine the operating performance of the business over a period of time such as a month, three months, or one year.

8. 10-8 George Ross Photocopy Agency Income Statement March 31, 2004 DebitCredit Revenues Photocopy Fees Earned $9,400 Total Revenues 9,900 Expenses Office Wages Expense $1,100 Utility Expense230 Telephone Expense120 Rent Expense400 Insurance Expense50 Photocopy Supplies Expense500 Office Supplies Expense300 Depreciation Expense, Photocopy Equipment33 Depreciation Expense, Office Equipment88 Total Expense2,821 Net Income $7,079

9. 10-9 Statement of Owner’s Equity The statement of the owner’s equity tells the readers the total capital the company owns for a period of time. It also shows the investment the owner has made and how much the owner has withdrawn from the company’s account.

10. 10-10 George Ross Photocopy Agency Statement of Owner’s Equity March 31, 2004 March 31, 2004 ItemsDebitCredit George Ross, Capital, March 1,2004 Add: Investment by George Ross $20,000 Net Income 7,079 Subtotal 27,079 Less: Withdrawals $980 George Ross, Capital, March31, 2004 26,099

11. 10-11 Balance Sheet A balance sheet is a statement of the financial condition at a given point in time. It shows the company’s financial position: what it owns and what it owes.

12. 10-12 Balance Sheet Important uses of balance sheet: 1)The balance sheet indicates the business’s net worth. The balance sheet shows how the business is being funded, and how those funds are being used. 2) The balance sheet can help determine if too much or too little capital is tied up in permanent investments by comparing total current assets to total non-current assets. 3) The balance sheet gives information on how best to meet liabilities.

13. 10-13 George Ross Photocopy Agency Balance Sheet March 31, 2004 Accounts DebitCredit Assets Cash$9,590 Accounts Receivable 6,000 Photocopy Supplies 1,800 Office Supplies 500 Prepaid Rent 4,400 Prepaid Insurance 550 Photocopy Equipment 2,000 Less: Accumulated Depreciation, Photocopy Equipment$33 1,967 Office Equipment 5,300 Less: Accumulated Depreciation, Office Equipment 88 5,212 Total Assets 30,019

14. 10-14 Accounts DebitCredit Liabilities Accounts Payable $3,120 Unearned Photocopy Fees 800 Total Liabilities 3,920 Owner’s Equity George Ross, Capital 27,079 George Ross, Withdrawals980 __ Total Liabilities and Owner’s Equity 30,019 George Ross Photocopy Agency Balance Sheet March 31, 2004

15. 10-15 WE ARE SAILING RIGHT ALONG!!