CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

1

LESSON 7-1

REPORTING FINANCIAL INFORMATION

The financial information needed by business managers and business owners to make informed decisions can be found in the General Ledger accounts.

However, this information is very detailed and can take a long time to analyze.

To make the information contained in the General Ledger accounts more useable, the information is summarized and organized into Financial Statements.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

2

LESSON 7-1

REPORTING FINANCIAL INFORMATION

The names of the Financial Statements we are currently concerned with are the Income Statement and the Balance Sheet.

The Income Statement reports financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss.

The Balance Sheet reports financial information on a specific date, indicating the financial condition of a business.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

3

LESSON 7-1

REPORTING FINANCIAL INFORMATION

If sound financial decisions are to be made, the Financial Statements must be completed with accuracy.

The Financial Statements can be thought of as the story of a businesses performance.

Financial Statements are always prepared at the end of the Accounting Period Cycle.

The Accounting Period Cycle can be 1 month, 3 months, 6 months, or 1 year.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

4

LESSON 7-1

PREPARING FINANCIAL STATEMENTS

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 7-1

Preparing an Income Statement

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

6

LESSON 6-2

(b) 10000

(b) 10000

(a) 71500

(a) 71500

4964001000015000

11000

10000102500120000

200005000

50000062500

35650021300

280030000

881500 881500 81500 81500 146600 356500 734900 525000

356500 734900

49640010000150001000031000

11000020000

5000500000

62500

11000

21300

280030000

356500

10000

71500

209900 209900Net Income356500 734900

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

7

LESSON 7-1

INCOME STATEMENT INFORMATION ON A WORK SHEET page 182

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

8

LESSON 7-1

HEADING OF AN INCOME STATEMENT

1

2

3

page 182

1. Center the name of the company on the first line.

2. Center the name of the report on the second line.

3. Center the date of the report on the third line.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

9

LESSON 7-1

REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT

1Revenue3 Revenue amount

4Expenses

5Account titles 6 Expense amount

8Total expenses 9 Total of expenses

12 Net Income

7 Single line

11 Single line

10 Calculate net income

14 Double lines

13 Record net income

2 Account title

page 183

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

10

LESSON 7-1

COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT page 184

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

11

LESSON 7-1

INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS

1Revenue

3 Revenue amounts2Account titles

6Net Loss

7 Record Net Loss

5 Total Revenue

4 Total of revenue

page 185

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 7-2

Balance Sheet Information on a Work Sheet

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

13

LESSON 7-2

BALANCE SHEET page 187

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

14

LESSON 7-2

HEADING OF A BALANCE SHEET page 187

1

2

3

1. Center the name of the company on the first line.

2. Center the name of the report on the second line.

3. Center the date of the report on the third line.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

15

LESSON 7-2

ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188

4 Liabilities1 Assets

Total Liabilities8

2 Account titles

3 Asset amounts

Single line 7

6Liability amounts

5Account titles

Total of liabilities 9

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

16

LESSON 7-2

OWNER’S EQUITY SECTION OF A BALANCE SHEET page 189

7 Total Liab. and Owner’s Eq.

5 Total Assets

1 Owner’s Equity

2 Account title 3Capital amount

4 Single line

6Total of assets

8Total of Liabilities and Owner’s Equity

9Compare totals 10 Double lines

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

17

LESSON 7-2

OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET page 190

2Beginning capital amount

6Difference

8Current capital amount

1 Beginning capital

3 Net Income

4 Drawing

Ending capital7

9 Total Liabilities and Owner’s Equity

5 Single line