the balance sheet and profit and loss statement

8/7/2019 The Balance Sheet and Profit and Loss Statement

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P R E P A R E D B Y

M R . J U N A L E J O B A T H A N , M E M

Jun Alejo Bathan, MEM

The Balance Sheet

and the Profit and Loss Account


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Balance SheetBalance Sheet

yy ReportsReports assetsassets and claims to assets.and claims to assets.

yy Claims of creditors,Claims of creditors, liabilities.liabilities.

yy Claims of owners,Claims of owners, stockholdersequity.stockholdersequity.

yy Assets = Liabilities + Stockholders EquityAssets = Liabilities + Stockholders Equity

yy Specific dateSpecific date one point in time!one point in time!


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Balance SheetBalance Sheet

FromFrom

RetainedRetained

EarningsEarnings

StatementStatement


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Income StatementIncome Statement

yy Reports operating success or failure for aReports operating success or failure for a

period.period.

yy Summarizes revenues and expenses forSummarizes revenues and expenses for

period:period: month, quarter, year.month, quarter, year.

yy If revenueIf revenue >> expenseexpense == Net Income.Net Income.


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AssetsAssets

yy Resources owned by theResources owned by thebusinessbusiness

CashCash

Accounts receivableAccounts receivable

InventoriesInventories

Furniture and fixturesFurniture and fixtures

EquipmentEquipment SuppliesSupplies


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LiabilitiesLiabilities

yy Obligations or debts of businessObligations or debts of business

Notes payableNotes payable

Accounts payableAccounts payable

Interest payableInterest payable Salaries payableSalaries payable

Unearned revenueUnearned revenue


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Stockholders EquityStockholders Equity

yy Ownership claims on assetsOwnership claims on assets

PaidPaid--in capitalin capital

CommonstockCommonstock Retained earningsRetained earnings


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Basic Accounting EquationBasic Accounting Equation

Assets = Liabilities + Stockholders EquityAssets = Liabilities + Stockholders Equity


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ReviewReview

Which of the following isWhich of the following is notnot a correcta correctrepresentation of the accounting equation?representation of the accounting equation?

a.a. Assets = Liabilities + Stockholders EquityAssets = Liabilities + Stockholders Equity

d.d. AssetsAssets -- Stockholders Equity = LiabilitiesStockholders Equity = Liabilities

c.c. Assets + Stockholders Equity = LiabilitiesAssets + Stockholders Equity = Liabilities

b.b. AssetsAssets -- Liabilities = Stockholders EquityLiabilities = Stockholders Equity


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ReviewReview

Which of the following isWhich of the following is notnot a correcta correctrepresentation of the accounting equation?representation of the accounting equation?

a.a. Assets = Liabilities + Stockholders EquityAssets = Liabilities + Stockholders Equity

d.d. AssetsAssets -- Stockholders Equity = LiabilitiesStockholders Equity = Liabilities

c.c. Assets + Stockholders Equity = LiabilitiesAssets + Stockholders Equity = Liabilities

b.b. AssetsAssets -- Liabilities = Stockholders EquityLiabilities = Stockholders Equity


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ReviewReview

Using the accounting equation, answer theUsing the accounting equation, answer the

following question.following question.

If Liabilities = $10,000 andIf Liabilities = $10,000 and

Then Assets =Then Assets =

Stockholders Equity = $20,000Stockholders Equity = $20,000

$30,000 = $10,000 + $20,000$30,000 = $10,000 + $20,000

$30,000$30,000


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Using the accounting equation, answer theUsing the accounting equation, answer the

following question.following question.

If Assets = $75,000If Assets = $75,000

Then Stockholders Equity =Then Stockholders Equity =

And Liabilities = $35,000And Liabilities = $35,000

ReviewReview

$40,000$40,000

$75,000 = $35,000 + $40,000$75,000 = $35,000 + $40,000


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Supplements to the Financial StatementsSupplements to the Financial Statementsinin an Annual Reportan Annual Report

yy Management Discussion and AnalysisManagement Discussion and Analysis

yy Notes to Financial StatementsNotes to Financial Statements

yy Auditors reportAuditors report


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ManagementsManagements Discussion and Analysis coversDiscussion and Analysis coversthree items:three items:

1.1. LiquidityLiquidity

2.2. Capital resourcesCapital resources

3.3. Results of operationsResults of operations


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Managements Discussion and AnalysisManagements Discussion and Analysis


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Notes to Financial StatementsNotes to Financial Statements

yy Explanatory notes and supplementary schedulesExplanatory notes and supplementary schedules

yy Clarifies information in financial statementsClarifies information in financial statements

yy Expands with additional detailExpands with additional detail

yy Describes accounting policiesDescribes accounting policies

yy Explains uncertainties and contingenciesExplains uncertainties and contingencies


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Notes to Financial StatementsNotes to Financial Statements


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Auditors ReportAuditors Report

yy Certified Public AccountantCertified Public Accountant CPACPA

yy Auditor (CPA) conducts independent examination ofAuditor (CPA) conducts independent examination offinancial statementsfinancial statements

yy Fair representation?Fair representation?yy FollowFollowgenerally accepted accounting principlesgenerally accepted accounting principles

(GAAP)?(GAAP)?

yy Unqualified opinionUnqualified opinion


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AuditorsAuditors ReportReport


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Do It Problem: CSU CorporationDo It Problem: CSU Corporation

Service revenue $17,000

Accounts receivable $4,000

Accounts payable $2,000

Building rental expense $9,000

Notes payable $5,000Common stock $10,000

Retained earnings ?

Equipment $16,000

Insurance expense $1,000

Supplies $1,800

Supplies expense $200Cash $1,400

Dividends $600

CSU begins onCSU begins onJan. 1, 2007Jan. 1, 2007

For year endedFor year ended

Dec. 31, 2007,Dec. 31, 2007,prepareprepare

IncomeIncomestatementstatement

RetainedRetainedearningsearningsstatementstatement

Balance sheetBalance sheet


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Retained earnings ?

Equipment $16,000


Supplies $1,800


Dividends $600

Action step 1:Action step 1:Report theReport therevenues &revenues &expenses for aexpenses for aperiod of time,period of time,IncomeIncomeStatementStatement



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Retained earnings ?

Equipment $16,000


Supplies $1,800


Dividends $600

Action step 1:Action step 1:Report theReport therevenues &revenues &expenses for aexpenses for aperiod of time,period of time,IncomeIncomeStatementStatement



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CSUCorporationCSUCorporation


For the Year Ended December 31, 2007For the Year Ended December 31, 2007

Create the headingCreate the heading

Name of theName of the

statementstatement

Name of theName of the

companycompany

PeriodPeriod

of timeof time


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For the Year Ended December 31, 2007For the Year Ended December 31, 2007RevenuesRevenues

Service revenueService revenue $17,000$17,000

List the revenuesList the revenues

Use dollar signs to denote U.S. currencyUse dollar signs to denote U.S. currency


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RevenuesRevenuesService revenueService revenue $17,000$17,000ExpensesExpenses

Rent expenseRent expense $9,000$9,000Insurance expenseInsurance expense 1,0001,000

Supplies expenseSupplies expense 200200Total expensesTotal expenses 10,20010,200________________

List the expenses & underline subList the expenses & underline sub--totalstotals


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RevenuesRevenuesService revenueService revenue $17,000$17,000ExpensesExpenses

Rent expenseRent expense $9,000$9,000Insurance expenseInsurance expense 1,0001,000

Supplies expenseSupplies expense 200200Total expensesTotal expenses 10,20010,200

Net IncomeNet Income $ 6,800$ 6,800

Calculate net income: revenuesCalculate net income: revenues -- expensesexpenses________________________________

________________

________________


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Retained earnings ?

Equipment $16,000


Supplies $1,800


Dividends $600

Action step 2Action step 2::Show amountsShow amountsand causes ofand causes ofchanges inchanges inretainedretainedearningsearnings

Use Net IncomeUse Net Incomefrom Incomefrom IncomeStatementStatement

DividendsDividends

the balance sheet and profit and loss statement

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