Chapter
Download
1 / 23

The McGraw-Hill Companies - PowerPoint PPT Presentation


  • 668 Views
  • Updated On :

Chapter 5. THE ACCOUNTING CYCLE: REPORTING FINANCIAL RESULTS. This is the Adjusted Trial Balance for JJ’s. . Now, let’s prepare the financial statements for JJ’s Lawn Care Service for May. Net income also appears on the Statement of Retained Earnings . Dividends Business Losses.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' The McGraw-Hill Companies' - omer


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Chapter5

THE ACCOUNTING CYCLE: REPORTING FINANCIAL RESULTS


This is the Adjusted Trial Balance for JJ’s.

Now, let’s prepare the financial statements for JJ’s Lawn Care Service for May.


Net income also appears on the Statement of Retained Earnings.


Statement of retained earnings

  • Business Earnings

Statement of Retained Earnings

This statement summarizes the increases and decreases in Retained Earnings during the period.




Drafting notes to the financial statements
Drafting Notes to the Financial Statements Lawn Care Service for May.

  • Examples of Items Disclosed

  • Lawsuits pending

  • Scheduled plant closings

  • Governmental investigations

  • Significant events occurring

    after the balance sheet date

  • Specific customers that

    account for a large portion of

    revenue

  • Unusual transactions and

    related party transactions

Notes to the

Financial Statements


Closing the temporary equity accounts
Closing the Temporary Equity Accounts Lawn Care Service for May.

The closing process gets the temporary accounts ready for the next accounting period.

  • Close Revenue accounts to Income Summary.

  • Close Expense accounts to Income Summary.

  • Close Income Summary account to Retained Earnings.

  • Close Dividends to Retained Earnings.


Closing the temporary equity accounts1
Closing the Temporary Equity Accounts Lawn Care Service for May.

Let’s prepare the closing entries for JJ’s Lawn Care Service.


Closing entries for revenue accounts
Closing Entries for Revenue Accounts Lawn Care Service for May.

Since Sales Revenue has a credit balance, the closing entry requires a debit to the Sales Revenue account.


Closing entries for revenue accounts1
Closing Entries for Revenue Accounts Lawn Care Service for May.


Closing entries for expense accounts
Closing Entries for Expense Accounts Lawn Care Service for May.

Since expense accounts have a debit balance, the closing entry requires a credit to the expense accounts.


Closing entries for expense accounts1
Closing Entries for Expense Accounts Lawn Care Service for May.

Net Income


Closing the income summary account
Closing the Income Summary Account Lawn Care Service for May.

Since Income Summary has a $400 credit balance, the closing entry requires a debit to Income Summary.


Closing the income summary account1

The balance in Income Summary is now Lawn Care Service for May.zero.

Closing the Income Summary Account


Closing the dividends account
Closing the Dividends Account Lawn Care Service for May.

Since the Dividends account has a debit balance, the closing entry requires a credit to the Dividends account.


Closing the dividends account1
Closing the Dividends Account Lawn Care Service for May.



Evaluating the business

Evaluating Profitability Trial Balance looks like this.

Evaluating Liquidity

Did the business earn a profit or loss in the current period?

What is the business’s future potential for a profit?

Does the business have assets available to pay debts as they become due?

Evaluating the Business


Evaluating the business1

Evaluating Profitability Trial Balance looks like this.

Evaluating Liquidity

Net Income Percentage

Net IncomeTotal Revenue

Working Capital

Current Assets – Current Liabilities

=

=

Return on Equity

Net IncomeAvg. Stockholders’Equity

=

CurrentRatio

Current AssetsCurrent Liabilities

=

Evaluating the Business


Preparing financial statements covering different periods of time
Preparing Financial Statements Covering Different Periods of Time

Many companies prepare financial statements at various points throughout the year.

Annually

Quarterly

Interim Financial Statements

Monthly

Jan. 1

Dec. 31



ad