chapter 7 notes slides - mrsburnett.weebly.com

Chapter 7 Notes Slides

Chapter 7

Financial Statements for a Proprietorship


Why prepare financial statements?

• summarize business information

• show condition of business

• concise and easily understandable


Adequate Disclosur

e

Going Concern

Accounting Perio

d Cyclechanges in financial info for a business are reported for a specific period of time on financial statements

when financial statements contain all necessary information to understand a business's financial condition

when financial statements are prepared with the expectation that a business will remain in operation indefinitely


7.1Preparing an Income Statement


Income Statement

financial statement showing the revenue and expenses for a fiscal period


An Income Statement....• reports revenue

• shows Net Income Net Lossor• reports expenses


Let's Prepare an Income statement!!


There are 4 Parts:1) Heading2) Revenue3) Expenses4) Net Income/Loss


Find the component percentagethe percentage relationship between one financial statement item and the total that includes that item

• Sales• Total Expenses

• Net Income/Loss

What about the "% of sales"?


Is that a good % or not?Two ways to know:

1) Acceptable percentages for related businesses are published.

2) Compare percentages from one fiscal period with those of the previous period.


A few different things you might see:

• Two Sources of Revenue

• Net Loss


(23.7)

Example:


Balance Sheet


Balance Sheetfinancial statement that reports assets, liabilities, and owner's equity on a specific date

It reports:• the financial strength of a business• information from the accounting equation


Financial Strength• compare assets to liabilities:

assets liabilitiesvs.


The Accounting Equation

+=Assets LiabilitiesOwner's

Equity


Let's create a balance sheet!

There are 4 sections:1) Heading2) Assets3) Liabilities4) Owner's Equity


Calculating Current Owner's EquityWhen there is a net income:


What if there is a net loss?

chapter 7 notes slides - mrsburnett.weebly.com

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