Chapter 9. Accoun/ng

Transcription

1 Chapter 9 Accoun/ng

2 Aim: How do you prepare an income statement? Do Now: 1. Take out the Chapter 9 Packet and answer the What Do You Think? ques/on about Tapa/o. 2. Write the Aim in your notebook 3. Take out your HW Reinforce the Main Idea Do The Math Problem 9.1 hlp://glencoe.com/sites/common_assets/accoun/ng/ audit_alex/player.html

3 Financial Statements Financial Statements summarize the changes resul/ng from business transac/ons that occur during an accoun/ng period. Financial Statements include: Income Statement Balance Sheet Statement of changes in owner s equity Statement of cash flows

4 Income Statement Income statement reports the net income or net loss for a specific period of /me. Also called the profit and loss statement Revenue Expenses = Net income or (Net loss)

5 Income Statement Sec/ons The heading 1. The name of the business (Who?) 2. The name of the report (What?) 3. The period covered (When?) The revenue for the period The expenses for the period The net income or net loss for the period

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7 Revenue A_er the heading has been completed, enter the revenue earned for the period. The informa/on used to prepare the income statement comes from the worksheet.

8 Steps To Record Revenue A - Write Revenue: on the first line at the le_ side. B - Enter revenue account names beginning on the second line. C - Enter the balance of each revenue account in the first amount column. Enter the total revenue in the second amount column beneath the last revenue amount and write Total Revenue to the right.

9 Steps To Record Expenses D - On the line following the revenue sec/on, write Expenses: at the le_ side. E - Enter expense account names beginning on the next line and enter the balances in the first amount column. F - Draw a single rule line under the last balance. G - Write Total Expenses on the line beneath the last expense account name. H - Add the balances for the expense accounts and enter the amount in the second amount column below the last expense account balance.

10 Steps to Record Net Income I - Draw a single rule line under the total expenses amount. J - Subtract total expenses from total revenue and enter the value in the second amount column under the total expenses amount. K - To the le_ of this value, write Net Income. L - If this amount matches the amount on the work sheet, draw a double rule beneath the net income amount.

11 Repor/ng a net loss If total expenses are more than total revenue, a net loss exists. Enter the amount of the net loss in the second amount column under the total expenses amount. Write the words Net Loss on the same line at the le_ side of the form.

12 Net Loss

13 Assignment Complete Problem 9.4

14 Aim: How do you prepare an income statement? How do you prepare a statement of changes in Owner s Equity? Do Now: Take out Problem 9.4 Think About It: Where do accountants get the informacon to prepare the Income Statement? hlp://glencoe.com/sites/common_assets/ accoun/ng/audit_alex/player.html

15 Problem 9.4 Wilderness Rentals Income Statement For the Month Ended September 30, 2017 Revenue: Equipment Rental Revenue Expenses: Adver/sing Expense Maintenance Expense Rent Expense U/li/es Expense Total Expenses Net Income

16 Assignment Revenue: Emmet Tree Service Income Statement For the Month Ended June 30, 2017 Expenses: Net Income

17 Owner s Equity Owner s equity owner s claims to the assets of a business. An increase in owner s equity means the owner s claims to the assets of the business has grown. A decrease means the owner s claims to the assets has been reduced.

18 Owner s Equity Cri/cal Thinking Why are business owner s concerned about whether owner s equity increased or decreased? It reflects whether the investment is providing an adequate return, and how the business is performing. What decisions would an owner make based on changes in owner s equity?

19 Owner s Equity Statement of changes in owner s equity summarizes changes in the owner s capital account as a result of business transac/ons that occur during the period. Eventually, the balances of revenues, expenses, and the owner s withdrawal account will be transferred to the owner's capital account.

20 Statement of Changes in Owner s Equity The informa/on to prepare this statement is found in: the work sheet the income statement the owner s capital account in the general ledger

21 Assignment Statement of Changes in Owner s Equity worksheet Use the Steps worksheet and the example on page 226 to help you prepare the Statement of Changes in Owner s Equity

22 Assignment Prime Prin/ng Company Statement of Changes in Owner s Equity For the Month Ended June 30, 2017 Beginning Capital, June 1, 2017 Add: Investment by Owner Net Income Total Increase in Capital Subtotal Less: Withdrawals by Owner Ending Capital, June 30, 2017

23 Homework Problem 9.2 Problem 9.5 pg. 166 & 167 Use the work sheet to help you prepare the Statement of Changes in Owner s Equity

24 Aim: How do you prepare a Statement of Changes in Owner s Equity? Do Now: 1. Take the two worksheets from my desk One is a resource for you to use when preparing Income Statements and Statements of Changes in Owner s Equity. The other sheet is an Income Statement to complete now 2. Copy the Aim in your notebook. 3. Take out Problem 9.2

25 Assignment Revenue: Prime Prin/ng Company Income Statement For the Month Ended June 30, 2017 Expenses: Net Income

26 Problem 9.2 Beginning Capital Investments Revenue Expenses Withdrawals Answers 1 $60,000 $500 $5,100 $2400 $ , ,880 7, ,800 1,000 6,450 6, ,500 5,320 4, , ,520 3, ,870 1,300 13,980 9,440 1,700

27 Owner s Equity Owner s equity owner s claims to the assets of a business. An increase in owner s equity means the owner s claims to the assets of the business has grown. A decrease means the owner s claims to the assets has been reduced.

28 Owner s Equity Cri/cal Thinking Why are business owner s concerned about whether owner s equity increased or decreased? It reflects whether the investment is providing an adequate return, and how the business is performing. What decisions would an owner make based on changes in owner s equity?

29 Owner s Equity Statement of changes in owner s equity summarizes changes in the owner s capital account as a result of business transac/ons that occur during the period. Eventually, the balances of revenues, expenses, and the owner s withdrawal account will be transferred to the owner's capital account.

30 Statement of Changes in Owner s Equity The informa/on to prepare this statement is found in: the work sheet the income statement the owner s capital account in the general ledger

31 Assignment Statement of Changes in Owner s Equity worksheet Use the Steps worksheet and the example on page 226 to help you prepare the Statement of Changes in Owner s Equity

32 Steps to complete Statement of Owner s Equity A. On the first line, write Beginning Capital followed by a comma and the first day of the period. B. Enter the balance of the capital account in the second column (found on general ledger). If using a work sheet, you will have to subtract Investments by Owner to find the original beginning balance. C. Enter the increases to the capital account. Enter the total investment in the first amount column. Enter the words Net Income and the net income amount Draw a single rule under the net income amount.

33 Steps to complete Statement of Owner s Equity D. Write Total Increase in Capital beneath the increases and enter the total increases in the second amount column. E. Write Subtotal on the next line and enter the beginning capital added to the total increase. F. List the decreases to the capital account beginning on the next line (Less). Enter the withdrawals amount and draw a single rule under the withdrawals amount. G. Write Ending Capital on the next line followed by a comma and the last day of the period. H. Subtract the withdrawals amount from the subtotal to get the ending balance of the capital account. (Double rule)

34 Aim: How do you prepare a statement of changes in Owner s Equity? What is the purpose of a Balance Sheet? Do Now: Take out your Homework (Statement of Changes in Owner s Equity worksheet)

35 Assignment Prime Prin/ng Company Statement of Changes in Owner s Equity For the Month Ended June 30, 2017 Beginning Capital, June 1, 2017 Add: Investment by Owner Net Income Total Increase in Capital Subtotal Less: Withdrawals by Owner Ending Capital, June 30, 2017

36 Assignment Revenue: Diana s Decora/ng Service Income Statement For the Month Ended December 31, 2017 Expenses: Net Income

37 Assignment Diana s Decora/ng Service Statement of Changes in Owner s Equity For the Month Ended December 31, 2017 Beginning Capital, December 1, 2017 Add: Net Income Subtotal Less: Withdrawals by Owner Ending Capital, June 30, 2017

38 Beginning Balance The beginning balance of the owner s equity account may be different then the one on the worksheet. For example, suppose an owner invested addi/onal capital to the company during the period. That amount would be different than the beginning balance.

39 Beginning Balance There are two ways to determine the owner s capital account balance at the beginning of the period: 1. Look at the ledger 2. Subtract the addi/onal investments from the account balance shown on the worksheet.

40 Statement of Changes in Owner s Equity Showing a Net Loss How do you increase owner s equity? Investments by owners How does owner s equity decrease? Withdrawals by owner or net loss The amounts of the individual items are entered in the first column, the total decrease in capital is entered in the second amount column.

41 Assignment Problem 9.5 pg. 166 & 167 Use the work sheet to help you prepare the Statement of Changes in Owner s Equity