Financial Puzzle Mark Kolta
How are Financial Statements prepared? 1 1
INCOME STATEMENT - Indicates revenues less expenses = net income for a period of time
2 2
STATEMENT OF RETAINED EARNINGS - Indicates changes in Owner’s Equity for a period of time
3 3
4 4
STATEMENT OF CASH FLOWS - Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time (Cash basis).
BALANCE SHEET - Indicates the ending balances of assets, liabilities, and owners’ equity at a point in time
Income Statement - Indicates revenues less expenses = net income for a period of time • • • • • • •
Examples of accounts: Revenues: Sales, Fees Expenses: Cost of Goods Sold, Salaries, Rent, Utilities, Depreciation, Interest
Statement of Retained Earnings - Indicates changes in Owner’s Equity for a period of time •
Beginning Balance: (if any)
•
Add: Net income or
•
Subtract : Net loss
•
Add: Owner Contributions
•
Less: Dividends
•
= Ending Balance
Statement of Cash flows Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time (Cash basis).
3 Categories: •
Operating
•
Investing
•
Financing
Statement of Cash flows Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time (Cash basis). •
• • • • •
Operating – Cash in and out from operating activities Cash received from customers Cash paid to employees Cash paid to suppliers Cash paid for rent Cash paid for utilities
Statement of Cash flows Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time (Cash basis). INVESTING ACTIVITIES
FINANCING ACTIVITIES
. Purchase and sale of long-term assets • Examples: • Cash paid for Car • Cash paid for Computer • Cash received for Car • Cash received for Computer
Obtaining cash or other resources to pay for investments in long term assets. • Examples: • Cash received from borrowing a loan • Cash paid to payoff loan • Cash paid to owners (shareholders) dividends • Cash received from owners (investing in the business)
Balance Sheet Indicates the ending balances of assets, liabilities, and owners’ equity at a point in time
Assets = Liabilities + Owner’s Equity Assets: • Cash, Accounts Receivable, Supplies, • Prepaid Assets (Insurance), Inventory, • Car, Accumulated Depreciation – Car •
YOU HAVE
YOU OWE
Liabilities: • Accounts Payable, Interest Payable, Utilities Payable, • Notes Payable YOU Owner’s Equity: OWN • Capital, Withdrawals/Drawing