Key Concepts
The date on a monthly balance sheet prepared on July 31 is written as
July 31, 20--
What is an income statement ?
A company's expense, income, gains, and losses
What is the statement of owners equity ?
Shows the changes in the equity for a period of time
What is a balance sheet ?
A financial statement that reports a company's assets, liabilities, and shareholder equity.
What is a asset ?
Something valuable that an entity owns, benefits from, or has use of, in generating income.
The date on a monthly statement of owner's equity prepared on May 31st is written as...
For the month ended May 31, 20--
An income statement reports a business's financial
progress over a specific period of time
What is the heading of a Statement of Owner’s Equity?
1. Name of company (lulu supplies)
2. Name of report (Statement of owners equity)
3. Date of report (for month ended...)
A balance sheet reports a business's financial
condition on a specific date
What is a liability ?
Accounts and wages payable, accrued rent and taxes, trade debt, and short and long-term loans.
Information needed to prepare an income statement's expense section is obtained from a work sheet's Account Title column and
Income Statement Debit column
The sections of an income statement are
heading, revenue, expenses, and net income or net loss
The amount of capital reported on a statement of owner's equity is calculated as
Capital Account Balance + Net Income - Drawing Account Balance
When preparing a balance sheet, the amount of owner's capital is calculated using amounts obtained from
the work sheet's Balance Sheet columns
What accounts payable ?
Unpaid bills. Accounts that are owed to suppliers as distinguished from accrued interest, rent, salaries, taxes, and other such accounts
Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept
Accounting Period Cycle
The amount of net income calculated on an income statement is correct if __.
it is the same as net income shown on the work sheet
Information needed to prepare a statement of owner's equity is obtained from a work sheet's Account Title column and
Balance Sheet Columns
Information needed to prepare a balance sheet's Assets section is obtained from a work sheet's Account Title column and
Balance Sheet Debit column
What is accounts receivable ?
Sales made but not paid-for by the customer.
Assuring that financial statements contain all information necessary to understand a business's financial condition is an application of the accounting concept
Adequate Disclosure
Information needed to prepare an income statement's revenue section is obtained from a work sheet's Account Title column and
Income Statement Credit column
What is equity ?
an ownership interest in a corporation in the form of common stock or preferred stock, total assets minus total liabilities
Information needed to prepare a balance sheet's Liabilities section is obtained from a work sheet's Account Title column and
Balance Sheet Credit column.
Four Major Components of Financial Statements
1) Balance Sheet (Statement of Financial Position)
2) Income Statement
3) Statement of Owner's Equity
4) Statement of Cash Flows