1. Reporting Financial results on Financial statements
Chapter 3
T.Hend Alajaji

3. Financial statement : Balance sheet Income statement
Statement of cash flows
Statement of retrained earning

4. Classified Balance Sheet Preparing Balance Sheet Income Statment
Ch3
Financial Statement
Balance Sheet
Transaction
Classified Balance Sheet
Preparing Balance Sheet
Income Statment
Classified income statement
Preparing income statement

5. Objectives ( Balance Sheet ) :
Transaction
The types of events for transactions
Balance sheet
Classified Balance Sheet
Preparing a balance sheet

6. Transactions and other actives :
Business activities that effect the basic accounting equation A = L + SE
Are called  Transactions

7. Transactions include two types of events :
External exchanges :
There are exchanges involving assets, liabilities and stockholder equity that you can see between the company and someone .
Internal exchanges :
these events do not involve exchanges with others outside the business but rather occur within the company itself .

8. Preparing a balance sheet

9. Preparing a balance sheet
Using the ending amount from each T-account you could now prepare a balance sheet
Before do this , it’s good idea to check that the accounting records are in balance by determining whether debits = credit

10. Balance sheet :
Reports the amounts of assets , liabilities and stockholders equity of a business at a point in time .
Classified Balance Sheet :
A balance sheet that shows a subtotal for currents assets and current liabilities .

11. Classified Balance Sheet
Current Assets  Cash and other assets that are expected to be converted into cash, sold, or used up usually within a year or less, through the normal operations of the business, are called current assets.
Cash
Accounts Receivable
Notes Receivable  are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate.
Supplies.
Prepaid expenses .
Accrued revenues .

12. Classified Balance Sheet
2- Fixed Assets  Property, plant, and equipment (also called fixed assets or plant assets) include assets that depreciate over a period of time. Land is an exception, as it is not subject to depreciation.
Equipment
Buildings
Land

13. Classified Balance Sheet
3- Current Liabilities  Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.
Accounts payable
Wages payable
Interest payable
Unearned fees

14. Classified Balance Sheet
4- Long-Term Liabilities  Liabilities not due for a long time (usually more than one year) are called long-term liabilities.
Short-term notes payable
Mortgages payable
Bonds payable

15. Classified Balance Sheet
5- Owner’s Equity  Owner’s equity is the owner’s right to the assets of the business. Owner’s equity is added to the total liabilities, and this total must be equal to the total assets.

16. Company Name
Balance Sheet
Date
Assets
Liabilities
Current Assets
Current Liabilities
Cash ………………………………………... xx
Accounts payable ……………………………
Accounts Receivable ……………
Note payable ……………………………………
Notes Receivable …………………
Wages payable …………………………………
Supplies …………………………………
Interest payable ………………………………
Prepaid Expenses……………………
Unearned fees …………………………………
……………………Total current Assets
Total current Liabilities …………………
Fixed Assets
Long-Term Liabilities
Land …………………………………………
Short-term notes payable ……………
Equipment ………………………………
Mortgages payable …………………………
Accum. Dep. – equipment ……
Bonds payable …………………………………
Machinery ………………………………
Loans …………………………………………………
Accum. Dep. – machinery ……
totalLong-Term Liabilities…………
Buildings …………………………………
Accum. Dep. – Buildings ………
Owner’s Equity
Cars (automobile) …………………
Owner’s capital …………………………………
Accum. Dep. – cars ………………
Total fixed assets ………………
Total assets ……………………………
Total Liabilities and Owner’s equity

17. NetSolutions
Balance Sheet
December 31, 2011
Assets
Liabilities
Current Assets
Current Liabilities
Cash
2,065
Accounts payable
900
Accounts Receivable
2,720
Wages payable
250
Supplies
760
Unearned rent
240
Prepaid insurance
2,200
Total current Liabilities
1,390
Total current assets
7,745
Fixed Assets
Owner’s Equity
Land
20,000
Chris clark, capital
28,105
Equipment
1,800
Accum. Dep. - equipment
(50)
Total fixed assets
21,750
Total assets
29,495
Total Liabilities and Owner’s equity

18. Exercise 1 : complete the following table .
Indicate whether the account is classified as Current assets , noncurrent assets , current liabilities , noncurrent liabilities , or stockholder equity and whether the account usually has a debt or credit balance .

19. Debit or Credit Balance Balance sheet Classification
Account
Land
Retained Earning
Notes payable (due in three years )
Accounts Receivable
Supplies
Equipment
Accounts Payable
Cash
Taxes payable

20. Exercise 2 : complete the following table Balance Sheet
December 31, 2011
Assets
Liabilities
Current Assets
Current Liabilities
Cash
1000
Accounts payable
3000
Accounts Receivable
500
Wages payable
1500
Supplies
2500
Unearned rent
Prepaid insurance
Total current Liabilities
Total current assets
Fixed Assets
Owner’s Equity
Land
5000
Chris clark, capital
8000
Equipment
2000
Accum. Dep. - equipment
(500)
Total fixed assets
Total assets
Total Liabilities and Owner’s equity

21. Exercise 3 :
From the following table prepare a classified Balance sheet at December 
3000
land
Cash
5000
Supplies
Accounts Receivable
7000
Accounts Payable
4000
Inventory
8000
Note payable ( due 2013)
2000
Notes receivable ( due 2013)
Retained Earning
2500
Equipment
Loans
500
Accum. Dep. – equipment

22. Preparing a Income Statement

23. Objectives : Income Statement .
The Three main sections of income statement.
Accounting Methods
Preparing Income Statement .

24. Income Statement It called also the statement of operations .
It is reports the amount of revenues less expenses for a period of time .
The income Statement summarize the financial impact of operating actives under taken by the company during the accounting period .
A financial statement that measures a company's financial performance over a specific accounting period.

25. Income Statement include three main sections :
1- Revenues . Amounts earned by selling goods or services . 2- Expenses . Costs of business necessary to earn revenues 3- Net income . The excess of revenues over expenses

26. For The Period Ended (Date)
Company Name
Income Statement
For The Period Ended (Date)
Revenues ……………………………………………………………
xxx
Total Revenues …………………………………………………
Expenses ……………………………………………………………
Total expenses …………………………………………………
(xxx)
Net income (or net loss) ………………………………

27. Expenses+Assets=Liabilities+Capital+Revenues
Debit Accounts
If Debit, and if Credit
Credit Accounts
If Credit, and if Debit
Decrease
Increase
Item
Revenues
Expenses

28. Accounting Methods :
1- Cash Basis Accounting : Reports revenues when cash is received and expenses when cash is paid . 2- Accrual Basis Accounting : Reports revenues when they are earned and expenses are incurred regardless of the timing of cash receipts

29. Matching Principle :
The requirement under accrual basis accounting to record expenses in the same period as the revenues they generate not necessarily the period in which cash is paid for them .
Expense
Revenues

30. For The Year Ended December 31, 2011
Netsolutions
Income Statement
For The Year Ended December 31, 2011
Fees earned ………………………………………………………
16,840
Rent revenue ……………………………………………………
120
Total revenues ………………………………………
16,960
Expenses:
Wages expense ……………………………………
4,525
Supplies expense ……………………………………
2,040
Rent expense …………………………………………
1,600
Utilities expense ……………………………………
985
Insurance expense ………………………………
200
Depreciation expense ………………………... 50
Miscellaneous expense …………………………
455
Total expenses …………………………
9,855
Net income ………………………………………………………
7,105

31. Exercise 1 :
Complete the following table by entering either debts or credit in each cell :
Decrease
Increase
Item
Revenues
Expenses

32. Company Name : Alaml Company For The Period Ended (December 31 2013 )
Exercise 2 :
Complete the following :
Company Name : Alaml Company
Income Statement
For The Period Ended (December )
Revenues ……………………………………………………………
8000
Total Revenues …………………………………………………
Expenses ……………………………………………………………
3000
Total expenses …………………………………………………
( )
Net income (or net loss) ………………………………

33. Exercise 3 :
From the following table prepare a Income statement at December 
Items
10000
Passenger ticket Revenues
8000
Onboard Revenues
1000
Ship expenses
1500
Selling expenses
4000
Wage expenses
Income tax Expenses

34. Objectives ( statement of cash flow) :
Business Activities and Cash Flows
Classifying Cash Flows

35. Business Activities and Cash Flows
The Statement of Cash Flows focuses attention on:
Operations
Cash received and paid for day-to-day activities with customers, suppliers, and employees.
The Statement of Cash Flows shows each major type of business activity that caused a company’s cash to increase or decrease during the accounting period. The major types of business activities are:
Operations – The Statement of Cash Flows shows the cash received and paid for day-to-day activities with customers, suppliers, and employees.
Investing – The Statement of Cash Flows shows cash paid and received from buying and selling long-term assets.
Financing – The Statement of Cash Flows shows cash received and paid for exchanges with lenders and stockholders.
Investing Cash paid and received from buying and selling long-term assets.
Financing Cash received and paid for exchanges with lenders and stockholders.
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36. Business Activities and Cash Flows
Checking and Savings Accounts
Currency
Cash Equivalents
Highly liquid short-term investments within three months of maturity.
Part I
Cash includes currency on hand.
Part II
Cash also includes checking accounts, savings accounts, and certain money market accounts.
Part III
The third component of cash is called cash equivalents. Cash equivalents are short-term, highly liquid investments that are easily converted into cash and that have very little risk of loss. An example of a cash equivalent would be a short-term Treasury Bill that is government issued, is within three months of its maturity date, and has very little risk associated with it.
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37. Classifying Cash Flows
On your screen, you see a condensed Statement of Cash Flows from Under Armour, Inc. for Notice the three basic sections on the Statement of Cash Flows:
 Operating Activities
 Investing Activities
 Financing Activities
The statement also includes a reconciliation between beginning and ending cash and cash equivalents. We will be examining the sections of this statement in detail for the remainder of the chapter.
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38. Operating Activities
Cash inflows and outflows that directly relate to revenues and expenses reported on the income statement.
Part I
The cash flows from operating activities section of the Statement of Cash Flows shows us the inflows and outflows of cash that directly relate to income from normal operations reported on the income statement.
Part II
The Operating Activities Section includes cash inflows and cash outflows that result from the operations of the business and some incidental business transactions. Operating cash inflows include cash collected from customers, receiving dividends, and receiving interest. Operating cash outflows include purchasing services and goods for resale, Paying salaries and wages, paying income taxes, paying interest.
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39. Under Armour’s 2008 Investing Activities
Part I
The Investing Activities Section includes cash inflows from the sale or disposal of property, plant, and equipment, and the sale or maturity of investments in securities and cash outflows for the purchase of property, plant, and equipment and the purchase of investments in securities. The difference between these cash inflows and outflows is reported on the statement of cash flows as a subtotal, Net Cash Provided by (Used for) Investing Activities.
Part II
Under Armour had two investing activities in 2008 that required cash: the purchase of equipment for $36 million and the purchase of intangible assets for $2 million.
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40. Under Armour’s 2008 Financing Activities
Part I
The Financing Activities Section includes cash inflows from borrowing from lenders through formal debt contracts and issuing stock to owners and cash outflows for repaying principal to lenders, repurchasing stock from owners, and paying cash dividends to owners. The difference between these cash inflows and outflows is reported on the statement of cash flows as a subtotal, Net Cash Provided by (Used for) Financing Activities.
Part II
Under Armour had the following financing activities in 2008:
Long-term debt of $7 million was paid.
$16 million in new long-term loans were issued.
Shares of stock were issued for $12 million.
Although exceptions exist, a general rule is that operating cash flows cause changes in current assets and current liabilities, investing cash flows affect noncurrent assets, and financing cash flows affect noncurrent liabilities or stockholders’ equity accounts.
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41. E12-7 Preparing and Evaluating a Simple Statement of Cash Flows
(Indirect Method)
Required:
2. Prepare a statement of cash flows using the indirect method.
Part I
Required: 2. Prepare a statement of cash flows using the indirect method.
Part II
Using the indirect method, we start with Net Income. We add Depreciation, deduct the Accounts Receivable increase, add the inventory decrease, and add the Wages Payable increase to arrive at the net cash provided by operating activities of $170.
Part III
The only investing activity was the purchase of equipment for $60.
Part IV
The only financing activity was the increase in long-term debt of $60.
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