1 REPORTING FINANCIAL INFORMATION n The financial information

1 REPORTING FINANCIAL INFORMATION n The financial information needed by business managers and business owners to make informed decisions can be found in the General Ledger accounts. n However, this information is very detailed and can take a long time to analyze. n To make the information contained in the General Ledger accounts more useable, the information is summarized and organized into Financial Statements. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

2 REPORTING FINANCIAL INFORMATION n The names of the Financial Statements we are currently concerned with are the Income Statement and the Balance Sheet. n The Income Statement reports financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss. n The Balance Sheet reports financial information on a specific date, indicating the financial condition of a business. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

3 REPORTING FINANCIAL INFORMATION n If sound financial decisions are to be made, the Financial Statements must be completed with accuracy. n The Financial Statements can be thought of as the story of a businesses performance. n Financial Statements are always prepared at the end of the Accounting Period Cycle. n The Accounting Period Cycle can be 1 month, 3 months, 6 months, or 1 year. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

4 PREPARING FINANCIAL STATEMENTS CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

LESSON 7 -1 Preparing an Income Statement CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

6 496400 10000 15000 102500 120000 (a) (b) 496400 10000 15000 10000 31000 110000 71500 10000 20000 500000 62500 356500 21300 2800 30000 11000 881500 Net Income (b) 10000 (a) 71500 81500 21300 10000 2800 30000 71500 11000 81500 146600 356500 734900 525000 209900 356500 734900 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

7 INCOME STATEMENT INFORMATION ON A WORK SHEET CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 182 LESSON 7 -1

8 HEADING OF AN INCOME STATEMENT page 182 1 2 3 1. Center the name of the company on the first line. 2. Center the name of the report on the second line. 3. Center the date of the report on the third line. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

9 REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT page 183 7 Single line Revenue 1 Expenses 4 Account titles 5 Total expenses 8 2 Account title 3 6 Revenue amount Expense amount 9 Total of expenses 12 Net Income 11 Single line 14 Double lines 13 Record net income 10 Calculate net income CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

10 COMPONENT PERCENTAGE ANALYSIS OF page 184 AN INCOME STATEMENT CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

11 INCOME STATEMENT WITH TWO SOURCES page 185 OF REVENUE AND A NET LOSS 5 Revenue Account titles Total Revenue 1 2 3 Revenue amounts 4 Net Loss Total of revenue 6 7 Record Net Loss CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

LESSON 7 -2 Balance Sheet Information on a Work Sheet CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

13 BALANCE SHEET CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 187 LESSON 7 -2

14 HEADING OF A BALANCE SHEET page 187 1 2 3 1. Center the name of the company on the first line. 2. Center the name of the report on the second line. 3. Center the date of the report on the third line. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -2

15 ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188 Liability amounts Account titles 1 4 Assets 8 Account titles 3 Asset amounts 5 Liabilities Total Liabilities Single line 2 6 7 Total of liabilities CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 7 -2

16 OWNER’S EQUITY SECTION OF A BALANCE SHEET 1 Owner’s Equity 2 Account title Total of assets 5 4 page 189 Single line Capital amount 3 6 7 Total Assets Compare totals Total Liab. and Owner’s Eq. 10 Double lines 9 Total of Liabilities and Owner’s Equity CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 7 -2

17 OWNER’S EQUITY REPORTED IN DETAIL page 190 ON A BALANCE SHEET 3 Net Income Current capital amount 1 Beginning capital Difference Beginning capital amount 7 Ending capital 4 Drawing 8 6 2 5 Single line 9 Total Liabilities and Owner’s Equity CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -2