Financial Statements

Question 0

What does a “Statement of Owners Equity” do?

Answer 0

Explains changes in equity from Net Income (or loss) and from any owner investments and withdrawals over a period of time.

Question 1

What does an “Income Statement” do?

Answer 1

Describes a company’s Revenues and Expenses along with the resulting Net Income or loss over a period of time due to earnings activities.

Question 2

What does a “Balance Sheet” do?

Answer 2

Describes a company’s financial position (types and amounts of Assets, Liabilities, and Equity) at a point in time.

Question 3

What does a “Statement of Cash Flow” do?

Answer 3

Identifies cash inflows (Receipts) and cash outflows (payments) over a period of time.

Question 4

What’s on an “Income Statement”?

Answer 4

Revenues - Expenses = Net Income

                                       Company Name
                                      Income Statement
                           For month ended December 31, 2011

Revenues
Consulting Revenue 5,800
Rental Revenue 300
Total Revenues. ——- $6,100

Expenses
Rent Expense 1,000
Salaries Expense 700
Total Expenses. ——– $1,700
———
Net Income $4,400
———
———

Question 5

What’s on a “Statement of Owners Equity”?

Answer 5

Beginning Capital + Investments + Net Income - Withdrawals

                                       Company Name
                               Statement of Owners Equity
                         For month ended December 31, 2011

C. Taylor, Capital, December 1, 2011 0
Plus: Investments by Owner 30,000
Net Income 4,400 34,000
——- ——-
34,000

Less: Withdrawals by Owner 200
——-
C. Taylor, Capital, December 31, 2011 34,200
——-
——-

Question 6

What’s on a “Balance Sheet”?

Answer 6

Assets = Liabilities + Owners Equity

                                       Company Name
                                         Balance Sheet
                                     December 31, 2011

                  Assets                                            Liabilities Cash                              4,800        Accounts Payable            $6,200 Supplies                        9,600        Total Liabilities                    6,200 Equipment                   26,000

                                                                            Equity
                                                   C. Taylor, Capital.              34,200 Total Assets                $40,400.     Total Liabilities & Equity    40,400
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