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Financial Statements

The Income StatementSection 9.1

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Financial Statements

The Income StatementSection 9.1

Four Types of Financial Statements

Income Statement

Balance Sheet

Statement of Changes in Owner’s Equity

Statement of Cash Flows

financial statementsReports prepared to summarize the changes resulting from

business transactions that occur during an accounting period.

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The Income Statement

The Income StatementSection 9.1

income statementA report of the net income or net loss for a specific period;

sometimes called a profit-and-loss statement or earnings statement.

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The Income Statement

The Income StatementSection 9.1

The Heading

Name of the business

Name of the report

Period covered

See page 224

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The Income Statement

The Income StatementSection 9.1

A

B

C

Revenue Section

Write Revenue.

Enter revenue account names and balances. If only one listed, enter amount in right column, as shown.

Enter the balance of each revenue account.

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The Income Statement

The Income StatementSection 9.1

D

E

F

G

H

Write Expenses.

Enter expense account names and balances.

Draw a single rule line under the last balance.

Expenses Section

Write Total Expenses.

Add the balances for the expense accounts and enter total below the single rule line – in the right column.Home

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The Income Statement

The Income StatementSection 9.1

I

J

K

L

Draw a single rule line under thetotal expenses amount.

Subtract the total expenses fromtotal revenue.

Write Net Income (or Net Loss).

Net Income/Net Loss Section

If amount matches the amount on the work sheet, draw a double rule beneath the amount.

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The Income Statement

The Income StatementSection 9.1

Reporting a Net Loss

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The Statement of Changesin Owner’s EquitySection 9.2

The Statement of Changes in Owner’s Equity

Information needed to

prepare the statement of changes in

owner’s equity

statement of changes in owner’s equityA financial statement that summarizes changes in the owner’s capital

account as a result of business transactions during the period.

The owner’s capital account in the general ledger

The work sheet

The income statement

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Completing the Statement of Changes in Owner’s Equity

The Statement of Changesin Owner’s EquitySection 9.2

Steps for Completing the Statement of Changes in Owner’s Equity

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Completing the Statement of Changes in Owner’s Equity

The Statement of Changesin Owner’s EquitySection 9.2

Statement of Changes in Owner’s Equity Showing a Net Loss

Island Burgers

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Completing the Statement of Changes in Owner’s Equity

The Statement of Changesin Owner’s EquitySection 9.2

There are two ways to determine the owner’s capital account balance:

Look at the ledger.

Subtract additional investments from the balance shown on the

work sheet.

For an ongoing business, the capital account balance on the work sheet may not be the balance at the beginning of the period.

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• The income statement reports the net income or net loss for an accounting period.

• The statement of changes in owner’s equity shows how the owner’s financial interest changes during the accounting period.

• The balance sheet reports the financial position at a specific point in time.

• The statement of cash flows reports the sources and uses of cash during the accounting period.

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Assignment

Together – Income Statement & Statement of

Changes in Owner’s Equity in Excel using Mini Practice Set 1 Info

Connect – Chap 9 Sections 1&2