The Financial Statements Income statement Statement of owners

The Financial Statements • • • Income statement Statement of owner's equity Balance Sheet Exhibit (1 -1) Exhibit (1 -2) Exhibit (1 -3)

The Accounting Equation • Assets = Equities • Assets = Liabilities + Owner's Equity

Business Transactions • • • Increase and Decrease in Assets Increase in Assets and in Liabilities Increase in Assets and in Equity Decrease in Assets and in Liabilities Decrease in Assets and in Equity

Transaction Analysis • • • Investment by Owner Purchase Assets for Cash Purchase Assets on Account (on credit) Provide Service for Cash Provide Services for Credit (on Account)

Transaction Analysis (cont. ) • • • Collect of Cash from Customers Payment of Accounts Payable Payment of Expenses Owner Withdrawals Illustrative Example

ﺃﺴﺌﻠﺔ ﺍﻟﻤﺤﺎﺿﺮﺓ ﺍﻟﺜﺎﻧﻴﺔ • 1 - Net Income: – Decreases equity. – Represents the amount of assets owners put into a business. – Equals assets minus liabilities. – Is the excess of revenues over expenses.

2 - If equity is L. E. 300000 and liabilities are L. E. 192000 then assets equal: • • L. E. 108000. L. E. 192000. L. E. 300000. L. E. 492000.

3 - A payment to an owner is called a(n): • • • Liability. Withdrawal. Expense. Contribution. Investment.

4 - The statement of owner's equity: • Reports how equity changes as a point in time. • Reports how equity changes over a period of time. • Reports on cash flows for operating, financing and investing activities over a period of time. • Report on cash flows for operating, financing and investing activities at a point in time.

5 - The financial statement that shows the beginning balance of owner's equity; the changes in equity that resulted from new investments by the owner, net income (or net loss), and withdrawals; and the ending balance, is the: • • • Statement of financial position. Statement of cash flows. Balance sheet. Income statement. Statement of owner's equity.