ACCOUNTING 1 Financial Statement For a Proprietorship Chapter

ACCOUNTING 1 Financial Statement For a Proprietorship Chapter 7

Advanced organizer of our unit objective:

Purpose Financial Statements are needed by managers, owners, and stakeholders to make good business and financial decisions. Journals, ledgers and worksheets are too large and detailed for most users therefore, financial statements are prepared to neatly and accurately summarize the necessary information (adequate disclosure) There are dozens of financial statements we will focus on two: Income Statement (Revenues – Expenses) Balance Sheet (Assets = Liabilities + Owner’s Equity)

INCOME STATEMENT INFORMATION ON A WORK SHEET

COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT Always use 100% for Revenue as it is the basis for our component percentages. Net Income / Total Sales = % $2099 / $3565 = 58. 9% Total Exp. / Total Sales = % $1466 / $3565 = 41. 1%

INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS 5 Revenue Account titles Total Revenue 1 2 3 Revenue amounts 4 Net Loss 6 7 Record Net Loss Total of revenue

Always use 100% for Revenue as it is the basis for our component percentages. Total Exp. / Total Sales = % Net Income/ / Total Sales= =40. 9% % $2370 $5800 $3430 / $5800 = 59. 1%

Statement of Owner’s Equity Reports the changes in the capital account of a proprietorship. Owner’s are generally curious to read this statement as it shows their value in the company

BALANCE SHEET Assets Liabilities Owners Equity FLASHBACK: ANSWER: What is the accounting ASSETS = LIABILITIES + OWNER’S EQUITY equation?

OWNER’S EQUITY SECTION OF A BALANCE SHEET 1 Owner’s Equity 2 Account title Total of assets 5 4 Single line Capital amount 3 6 Total Assets Compare totals 7 9 Total Liab. and Owner’s Eq. 10 Double lines Total of Liabilities and Owner’s Equity 8

Assets Liabilities Note: the even row of doubleunderlined numbers Owner’s Equity From Statement of OE

From Statement of OE