BAT4mBAT4mUnit 1: Chapter 1Unit 1: Chapter 1

September 9 2014Quiz on Friday September 12,

2014

There are 4 types of financial statements.Income Statement: presents revenues

and expenses. It shows net income or net loss for a specific period of time.

Balance Sheet: reports the assets, liabilities and owner’s equity at a specific time.

Statement of owner’s equityCash flow statement

Financial StatementsFinancial Statements

It presents revenues and expenses. It shows net income or net loss for a

specific period of time. 3 titles: When: It shows a time period rather

than a specific date. For example, “Month ended September 30, 2008” What kind of time period does this income statement cover?

Income StatementIncome Statement

The main purpose : to show profitability of the company’s operation over a specific period of time.

Net Income = Revenue – Expense What are the most popular IS time

period for public corporation? Quarterly

Income StatementIncome Statement

What is the most popular IS time period for small business? Annually (once a year)

Do some corporations produce their IS every month? Yes

Income StatementIncome Statement

It reports assets, liabilities and owner’s equity at a specific time. For example, “September 30, 2008”

3 headings: BS is like a “snapshot of the

company’s financial condition.” What does this mean?

Balance SheetBalance Sheet

What is the order of ALO in BS?Assets first, liabilities next and OE How do asset accounts listed in BS? In the order of liquidity: Cash, AR,

Inventory, Supplies, Long term assets

How do liability accounts listed in BS?N

AP first, NR, Bank Loan, Mortgage

Balance SheetBalance Sheet

SOE reports the changes in OE for a specific period of time. “Month ended September 30, 2008”

3 titles: First line: beginning balance of the

capital account. How would you get this number?

Ending balance of last period SOE

Statement of Owner’s EquityStatement of Owner’s Equity

Next lines: + Owner’s investments + the net income and - drawings

How would you get these numbers? SOE indicates why OE has increased

or decreased during the period. Why would CRA mandate businesses

to make SOE? So they can accurately calculate corporate income tax and personal income tax.

Statement of Owner’s EquityStatement of Owner’s Equity

It gives information about the cash receipts and cash payments for a specific period of time.

It reports the following:• The cash inflows and outflows from investing

transactions (e.g purchasing machine)

• The cash inflows and outflows from financing transactions (e.g. borrowing and repayment of debt and withdrawls of owner

Cash Flow StatementCash Flow Statement

It reports the following:• The net increase or decrease in cash

during the period.

• The ending balance of cash amount at the end of the period

Cash Flow StatementCash Flow Statement

It answers the following questions: • Where did the cash come from during

the period?

• What was the cash used for during the period?

• What was the change in the cash balance during the period?

Cash Flow StatementCash Flow Statement

P20 Transaction Analysis (students will show their works on the board)

P35 E1-13P37 P1-5A

Class work / HomeworkClass work / Homework