definition of balance sheet, income statements and examples Supplements to the Financial Statements in an Annual Report Management’s Discussion and Analysis covers three items: Liquidity Capital resources Results of operations
The Balance Sheet and the Profit and Loss Account PREPARED BY MR JUN ALEJO BATHAN, MEM Jun Alejo Bathan, MEM Balance Sheet Reports assets and claims to assets Claims of creditors, liabilities Claims of owners, stockholders’ equity Assets = Liabilities + Stockholders’ Equity Specific date – one point in time! Balance Sheet From Retained Earnings Statement Income Statement Reports operating success or failure for a period Summarizes revenues and expenses for period: month, quarter, year If revenue > expense = Net Income Income Statement Assets Resources owned by the business Cash Accounts receivable Inventories Furniture and fixtures Equipment Supplies Liabilities Obligations or debts of business Notes payable Accounts payable Interest payable Salaries payable Unearned revenue Stockholders’ Equity Ownership claims on assets Paid-in capital Common stock Retained earnings Basic Accounting Equation Assets = Liabilities + Stockholders’ Equity Review 10 Which of the following is not a correct representation of the accounting equation? a Assets = Liabilities + Stockholders’ Equity b Assets - Liabilities = Stockholders’ Equity c Assets + Stockholders’ Equity = Liabilities d Assets - Stockholders’ Equity = Liabilities Supplements to the Financial Statements in an Annual Report 14 Management Discussion and Analysis Notes to Financial Statements Auditor’s report Management’s Discussion and Analysis covers three items: 15 Liquidity Capital resources Results of operations Management’s Discussion and Analysis 16 Notes to Financial Statements 17 Explanatory notes and supplementary schedules Clarifies information in financial statements Expands with additional detail Describes accounting policies Explains uncertainties and contingencies Notes to Financial Statements 18 Auditor’s Report 19 Certified Public Accountant – CPA Auditor (CPA) conducts independent examination of financial statements Fair representation? Follow generally accepted accounting principles (GAAP)? Unqualified opinion Auditor’s Report 20 Do It Problem: CSU Corporation 21 CSU begins on Jan 1, 2007 For year ended Dec 31, 2007, prepare Income statement Retained earnings statement Balance sheet Do It Problem: CSU Corporation 22 Action step 1: Report the revenues & expenses for a period of time, Income Statement Do It Problem: CSU Corporation 23 Action step 1: Report the revenues & expenses for a period of time, Income Statement Do It Problem: CSU Corporation 24 Create the heading Name of the company CSU Corporation Name of the statement Income Statement For the Year Ended December 31, 2007 Period of time Do It Problem: CSU Corporation 25 CSU Corporation Income Statement For the Year Ended December 31, 2007 Revenues Service revenue $17,000 List the revenues Use dollar signs to denote U.S currency Do It Problem: CSU Corporation CSU Corporation Income Statement For the Year Ended December 31, 2007 Revenues Service revenue Expenses Rent expense $9,000 Insurance expense 1,000 Supplies expense 200 Total expenses $17,000 10,200 List the expenses & underline sub-totals Do It Problem: CSU Corporation CSU Corporation Income Statement For the Year Ended December 31, 2007 Revenues Service revenue Expenses Rent expense $9,000 Insurance expense 1,000 Supplies expense 200 Total expenses Net Income $17,000 10,200 $ 6,800 Calculate net income: revenues - expenses Do It Problem: CSU Corporation 28 Action step 2: Show amounts and causes of changes in retained earnings Use Net Income from Income Statement ... Report the revenues & expenses for a period of time, Income Statement Do It Problem: CSU Corporation 24 Create the heading Name of the company CSU Corporation Name of the statement Income Statement. .. prepare Income statement Retained earnings statement Balance sheet Do It Problem: CSU Corporation 22 Action step 1: Report the revenues & expenses for a period of time, Income Statement Do It... equation, answer the following question If Assets = $75,000 And Liabilities = $35,000 Then Stockholders’ Equity = $40,000 $75,000 = $35,000 + $40,000 Supplements to the Financial Statements in an