Financial Statements and End-of-Fiscal-Period Entries for a Corporation

1
Chapter 26

• Financial Statements and End-of-Fiscal-Period
  Entries for a Corporation

2
Financial Statements for a Corporation

• Income Statement
• Statement of Stockholders Equity
• Balance Sheet

3
Income Statement

• Reports the financial progress of a business
  during a fiscal period.
• Contains
• Revenue
• Cost of Merchandise Sold
• Gross Profit on Operations
• Operating Expenses
• Net Income or Net Loss

4
Statement of Stockholders Equity

• Shows changes in a corporations ownership for a
  fiscal period.
• Contains
• Capital Stock
• Retained Earnings

5
Balance Sheet

• Reports assets, liabilities, and stockholders
  equity on a specific date.
• Can be used to determine the financial strength
  of a business.

6
Classifying Assets

• Assets are classified into two categories and are
  based on the length of time the assets will be in
  used
• Current Assets Examples would be cash, accounts
  receivable, merchandise inventory, supplies, and
  prepaid insurance
• Plant Assets Examples would be cash registers,
  computers, and display cases.

7
Book Value

• The difference between an assets account balance
  and its related contra account balance.
• Our company will be reporting three contra
  accounts
• Allowance for Uncollectible Accounts
• Accumulated Depreciation-Office Equipment
• Accumulated Depreciation-Store Equipment

8
Classifying Liabilities

• Liabilities are classified according to the
  length of time until they are due.
• Current liabilities are due within one year.
• Long-term liabilities are owed for more than a
  year. An example Mortgage Payable.

9
Analyzing a Balance Sheet

• Two analyses are used to evaluate the financial
  strength
• Working Capital the amount of total current
  assets less total current liabilities.
• Current Ratio a ratio that shows the numeric
  relationship of current assets to current
  liabilities.

10
Adjusting, Closing, and Reversing Entries for a
Corporation

• Adjustments are similar to those for
  proprietorships and partnerships, with the
  exception of federal income tax.
• Closing Entries are made from information in a
  work sheet.
• Reversing Entries are recorded when adjusting
  entries create a balance in an asset or liability
  account.