Expanded Balance Sheet Ch 3 pg 87 91

Expanded Balance Sheet Ch 3 pg 87 -91

The Drawings Account • The owner of a business may withdraw money or other assets for personal use • Any withdrawal of assets is recorded in an account called Drawings • Drawings is an equity account that appears in the Owner’s Equity section of the Balance Sheet – Drawings normally has a debit balance since Drawings decrease Owner’s Equity • The owner’s salary is considered Drawings – Not Salaries Expense! – Used for sole proprietorships and partnerships

The Complete Ledger • In summary, the general ledger contains the following: – One account for each asset – One account for each liability – One account for capital – One account for drawings – One account for each type of revenue – One account for each (major) expense

Completing an Accounting Period • At the end of the accounting period… 1. A Trial Balance is prepared 2. The revenue and expense accounts are used to prepare the Income Statement 3. The assets, liabilities and owner’s equity accounts (including drawings) are used to prepare the Balance Sheet

Expanded Owner’s Equity Section • The Income Statement is completed first because net income/loss affects ending Owner’s Equity on the Balance Sheet • Expanded Owner’s Equity C. Piccolo, Capital October 1 Add: Net Income for October Less: C. Piccolo, Drawings Decrease in Capital C. Piccolo, Capital October 31 $20, 000 $2, 000 3, 500 1, 500 $18, 500

Report Form Balance Sheet • Up to this point, we have used the Account Form Balance Sheet which lists assets on the left and liabilities and owner’s equity on the right • Another form of the Balance Sheet is the Report Form, which lists assets, liabilities and owner’s equity vertically • See example on next page – Also on page 92 of your text – Note the placement of the dollar signs!

Practice • Pg 95 Q’s 14 -19 • Pg 99 Q 15 – now prepare the balance sheet • Pg 100 Q 17