1. Chapter 3 T.Hend Alajaji

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

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

5.  Transaction  The types of events for transactions  Balance sheet  Classified Balance Sheet  Preparing a balance sheet

6.  Business activities that effect the basic accounting equation A = L + SE  Are called  Transactions

7.  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.

9.  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. 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. 1. 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. 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. 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. 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. 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 AssetsLiabilities Current AssetsCurrent Liabilities Cash ………………………………………...xxAccounts payable ……………………………xx Accounts Receivable ……………xxNote payable ……………………………………xx Notes Receivable …………………xxWages payable …………………………………xx Supplies …………………………………xxInterest payable ………………………………xx Prepaid Expenses……………………xxUnearned fees …………………………………xx ……………………Total current AssetsxxTotal current Liabilities …………………xx Fixed AssetsLong-Term Liabilities Land …………………………………………xxShort-term notes payable ……………xx Equipment ………………………………xxMortgages payable …………………………xx Accum. Dep. – equipment ……xxBonds payable …………………………………xx Machinery ………………………………xxLoans …………………………………………………xx Accum. Dep. – machinery ……xxtotalLong-Term Liabilities…………xx Buildings …………………………………xx Accum. Dep. – Buildings ………xxOwner’s Equity Cars (automobile) …………………xxOwner’s capital …………………………………xx Accum. Dep. – cars ………………xx Total fixed assets ………………xx Total assets ……………………………xxTotal Liabilities and Owner’s equityxx

17. NetSolutions Balance Sheet December 31, 2011 AssetsLiabilities Current AssetsCurrent Liabilities Cash2,065Accounts payable900 Accounts Receivable2,720Wages payable250 Supplies760Unearned rent240 Prepaid insurance2,200Total current Liabilities1,390 Total current assets7,745 Fixed AssetsOwner’s Equity Land20,000Chris clark, capital28,105 Equipment1,800 Accum. Dep. - equipment(50) Total fixed assets21,750 Total assets29,49 5 Total Liabilities and Owner’s equity 29,49 5

18.  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. E XERCISE 2 : complete the following table Balance Sheet December 31, 2011 AssetsLiabilities Current AssetsCurrent Liabilities Cash1000Accounts payable3000 Accounts Receivable500Wages payable1500 Supplies2500Unearned rent1000 Prepaid insurance3000Total current Liabilities Total current assets Fixed AssetsOwner’s Equity Land5000Chris clark, capital8000 Equipment2000 Accum. Dep. - equipment(500) Total fixed assets Total assetsTotal Liabilities and Owner’s equity

21. E XERCISE 3 : 3000land3000Cash 5000Supplies5000Accounts Receivable 7000Accounts Payable4000Inventory 8000Note payable ( due 2013) 2000Notes receivable ( due 2013) 5000Retained Earning2500Equipment 4000Loans500Accum. Dep. – equipment

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

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

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

28. 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.  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. 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.  Complete the following table by entering either debts or credit in each cell : DecreaseIncreaseItem Revenues Expenses

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

33. Items 10000Passenger ticket Revenues 8000Onboard Revenues 1000Ship expenses 1500Selling expenses 4000Wage expenses 1500Income tax Expenses From the following table prepare a Income statement at December 31 2013

34.  B USINESS A CTIVITIES AND C ASH F LOWS  Classifying Cash Flows

35. Operations Cash received and paid for day-to-day activities with customers, suppliers, and employees. Investing Cash paid and received from buying and selling long-term assets. Financing Cash received and paid for exchanges with lenders and stockholders. The Statement of Cash Flows focuses attention on: 12-35

36. Cash Checking and Savings Accounts Cash Equivalents Highly liquid short-term investments within three months of maturity. Currency 12-36

37. Classifying Cash Flows 12-37

38. Cash inflows and outflows that directly relate to revenues and expenses reported on the income statement. Operating Activities 12-38

39. Investing Activities Under Armour’s 2008 Investing Activities 12-39

40. Financing Activities Under Armour’s 2008 Financing Activities 12-40

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. 12-41