...statements, retained earnings statement, and statement of cash flows are the four basic financial statements. The balance sheet reveals what a business owns and what it owes. Income statements reveal how much cash comes in and how much goes out. Retained earnings are the net income retained in the corporation. Statements of cash flow reveal how company’s exchange money with other companies and the outside world. Balance Sheets The balance sheet gives thorough figures regarding a business’s assets, liabilities, and shareholder’s equity. Assets are what the business has possession of, the company’s property that is of value, businesses both, sale, and use assets to make merchandise, and offer services to sell. Assets consist of the companies touchable property, also including cash, trademarks, investments, and patents. Examples of liabilities or a claim of creditors’ is payment of monies, to banks, rent, and payroll, to suppliers, taxes, and commitments to supply goods and services to impending consumers. Claims of owners are stockholder’s equity or capital or net worth. These are the funds that remain when a business sale off their assets and pay off its liabilities. The remaining funds belong to the shareholders. Income Statements Income statements reveal how much cash a business makes over a year as well as showing the cost, and expenditures related to making that cash. The ending income statement reflects the businesses profits and loss. An Earnings per Share is...
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...needs of a company one must first comprehend the purpose of the four basic financial statements, how they are used by its employees and the valuable information they provide for its investors. The four basic financial statements are listed as income statements, retained earnings statements, balance sheets, and statements of cash flows. All four of these reports allow both their internal and external users to determine a wealth of information. The data collected from these reports can range from a corporation’s predicted future earnings to determining whether or not a company consists of sufficient funding to carry out its planned business operations. Breaking down the purpose for each of the four reports allows its users to gain a full comprehension regarding how these reports can be used effectively. The purpose of each of the listed financial statements is interrelated because each one supplements one another. Income statements monitor a specific period of time to determine the successes or failures of a company’s business operations. The retained earnings statement takes into consideration the same period as the income statement to show the amounts and reasons for variations in retained earnings. As a company begins any planned operation its internal users must determine if the cash they have on...
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...Financials The four basic financial statements are; Balance Sheet, Income Statement, The Retained Earnings Statement and the Statement of Cash Flow. The Balance Sheet reports assets and claims to assets at a specific point in time. Claims to assets are subdivided into two categories: claims of creditors which are called liabilities and claims of owners which are called stockholders’ equity. The Income Statement shows how success or the failure of the company’s operations for a period of time. The Retained Earnings Statement shows the amounts and causes of chanes in retained earnings during the period. The time period is the same as the covered by the income statement. The Statement of Cash Flow is to provide financial information about the cash receipts and cash payments of a business for a specific period of time. This helps investors, creditors and other external users in their analysis of thhe company’s cash position, this statement reports the cash effects of the company’s operating, investing and financing activities. This statement also shows the net increase or decrease in cash during the period and the amount of cash at the end of the period. Managers use financial statements to see the performance of the company. On the income statement, managers compare sales and expenses from one period to the previous period to identify potential problem areas. Employees take a look at the income statement to maintain responsibility for managing certain expenses...
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...because of selective reporting of economic events as well as non-comparable accounting methods and estimates, financial statements are only an approximation of reality. In addition, because of the tendency to delay accounting recognition, financial statements also tend to lag reality.” (About Financial Statements, para. 1). The four financial statements are prepared in the sequence shown, for the following reasons: Net income is computed first and is needed to determine the ending balance in retained earnings. The ending balance in retained earnings is needed in preparing the balance sheet. The cash shown on the balance sheet is needed in preparing the statement of cash flows. The four financial statements from the summarized accounting data are: 1. An income statement presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time. 2. A retained earnings statement summarizes the changes in retained earnings for a specific period of time. 3. A balance sheet reports the assets, liabilities, and stockholders’ equity of a company at a specific date. 4. A statement of cash...
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... 38,100 | (38,100) | 30 | (1,143,000) | | | | | | | | 3,805,500 | Total comprehensive income | $ 197,500 | $93,200 | | | 197,500 | | 9,730,500 | Retained Earnings 1/1 | $ 245,500 | $75,000 | b. 75,000 | | $245,500 | | 7,978,750 | Net income | 235,600 | 121,800 | | | 235,600 | 30 | 7,068,000 | Dividends | (100,000) | (42,600) | | a. 42,600 | (100,000) | 30 | (3,000,000) | Retained Earnings 12/31 | $ 381,100 | $ 154,200 | | | $ 381,100 | | 12,046,750 | OCI translation adjustment-1/1 | $0 | $0 | | | $ 0 | | | OCI for the year-translation adjustment | (38,100) | (28,600) | | | (38,100) | 30 | (1,143,000) | OCI translation adjustment-12/31 | $ (38,100) | $(28,600) | | | $ (38,100) | 30 | (1,143,000) | Other assets | $ 932,600 | $ 532,000 | | | $ 1,599,600 | 28.5 | 45,588,600 | Advance to P | | 84,000 | | d. 84,000 | 0 | | 0 | Investment In S | 551,600 | | | a. 26,600 b. 525,000 | 0 | | 0 | | | | | | | | | Patent | | | b. 150,000 | c. 24,000 | 126,000 | 28.5 | 3,591,000 | Payables | $ 392,200 | $ 190,400 | | | $ 582,600 | 28.5 | 16,604,100 | Advance from S | 84,000 | | d. 84,000 | | 0 | | 0 | Capital stock | 800,000 | 300,000 | b. 300,000 | | 800,000 | | 26,400,000 | Retained Earnings | 381,100 | 154,200 | | | 381,100 | | 10,978,750 | OCI | (38,100)...
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...operations on January 1, 2004. o During its first 3 years of operations, Lee reported net income and declared dividends as follows: | Net income | Dividends declared | 2004 | $ 40,000 | $ –0– | 2005 | 125,000 | 50,000 | 2006 | 160,000 | 50,000 | o The following information relates to 2007: Income before income tax: $240,000 Prior period adjustment: understatement of 2005 depreciation expense (before taxes): $ 25,000 Cumulative decrease in income from change in inventory methods (before taxes): $35,000 Dividends declared (of this amount, $25,000 will be paid on January 15, 2008): $100,000 Effective tax rate: 40% Lee Corporation | Retained Earnings Statement | For the Year Ended December 31, 2007 | Balance, January 1, as reported | $225,000* | | Correction for depreciation error (net of $10,000 tax) | (15,000) | | Cumulative decrease in income from change in inventory methods (net of $14,000 tax) | (21,000) | | Balance, January 1, as adjusted | 189,000 | | Add: Net income | 144,000** | | | 333,000 | | Less: Dividends declared | 100,000 | | Balance, December 31 | $233,000 | | *($40,000 + $125,000 + $160,000) – ($50,000 + $50,000) **[$240,000 – (40% X $240,000)] Common stock | $500 | Treasury stock | (-$200) | Additional paid-in principle | $1000 | Shares outstanding | 375,940 | Shares authorized | 500,000 | Shares in...
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...1988). What this means is that the purpose of accounting is to identify a company’s events, record those events in chronological order, showing which accounts are impacted by each event, and then communicate/report this information to interested parties in the form of financial reports. There are four basic financial reports that are typically used to report a business’ activities: Income statement, Retained earnings statement, Balance sheet, and Statement of cash flows. Each of these reports has a separate purpose, but is also interrelated. The income statement results in the net income, or net loss, of a company by presenting the revenues first and then the expenses, over a specific time period. If the revenues are greater than the expenses, a net income is reported, if not, then a net loss is shown. The result of the income statement is transferred to the beginning balance of the retained earnings statement. Without this figure, the retained earnings statement cannot be completed. The retained earnings statement summarizes the changes that affect the amount of earnings retained over a specific time...
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... He uses the idea of Jason’s business throughout the rest of the book. Every new concept that Greenblatt introduces, he comes back to Jason’s business and gives an example of how that concept could relate to Jason’s business. This gives the reader an easy understanding of how the different concepts that Greenblatt discusses affect certain businesses. Throughout the book, Joel Greenblatt discusses a “magic formula” to determine which stocks to invest in that will help you beat the stock market. He gives hard evidence that shows how this magic formula has not only worked in the past but why it will work in years to come. The “magic formula” consists of breaking down companies into two categories. The first category is price to earnings ratio. Greenblatt recommends...
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...The retained earnings formula is a calculation that derives the balance in the retained earnings account as of the end of a reporting period. Retained earnings is that portion of the profits of a business that have not been distributed to shareholders; instead, it is retained for investments in working capital and/or fixed assets, as well as to pay down any liabilities outstanding. The calculation is: + Beginning retained earnings + Net income during the period - Dividends paid = Ending retained earnings It is also possible that a change in accounting principle will require that a company restate its beginning retained earnings balance to account for retroactive changes to its financial statements. This will alter the beginning balance portion of the formula. It is quite possible that a company will have negative retained earnings. This can be caused by the distribution of a large dividend that exceeds the balance in the retained earnings account, or by the incurrence of large losses that more than offset the normal balance in the retained earnings account. There may be pressure from investors to issue a dividend if a company has built up a large balance in its retained earnings account over time, though this argument is not necessarily valid if the company still has profitable opportunities in which it can invest the excess funds. For example, ABC International has $500,000 of net profits in its current year, pays out $150,000 for dividends, and has a beginning retained...
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...one essay question worth 25 points and one problem worth 35 points. Terminal Course Objectives A, B, C, D, and E are all addressed on this exam. For the multiple choice questions worth 90 points, you should know: 1. Know what information is desired by external users of financial statements 2. Know about operating activities, investing activities, and financing activities 3. Be able to calculate net cash provided by operating activities in a simple situation (by identifying which activities are operating activities) 4. Know the definitions of asset, liability, equity, revenue, and expense 5. Know what items appear under each classification in the balance sheet 6. Know how to compute Earnings per Share 7. Know the composition of a Retained Earnings statement 8. Know about a ledger account, its different parts, the rules of debit and credit, and the meaning of the term normal balance of an account 9. Know about revenue recognition principle, matching principle, and time-period assumption 10. Know the computation net income under accrual accounting (revenues - expenses) 11. Know the meaning and purpose of adjusting entries, and the different types of adjusting entries 12. Know the difference between periodic and perpetual inventory systems 13. Know how to calculate net cost of purchases when terms of payment look like, for example, 3/10 n/45 14. Know the components of cost of merchandise...
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...in a company. There is the income statement, the retained earnings statement, the balance sheet, and the statement of cash flows. There is a specific use for each one of these statements, and they all work together to show what is going on within a company. These statements also help the internal users, such as the managers and employees, in many ways. These statements also help the external users, such as the creditors and investors, in many ways. Each statement, their use, and how they help the internal and external users will be explained in the following. Four Basic Financial Statements: When looking at the income statement you will see a list of expenses that show what has been spent within a certain time frame. The main expenses that are Revenues and Expenses, these are broken down more in depth to explain where the money is going. An income statement is what a company uses to report if a company is failing or successful. In other words tells how a company is doing by showing the operations of the company in a period, whether it is a day-to-day period or a year-to-year period. When looking at the retained earnings statement, there is a chart with the retained earnings, with the beginning of the time period and retained earnings at the end of the period. This statement is used to show what amount was that was retained and the reason for it being retained in a period. As a better definition, the retained earnings are what is retained from the net income of a company. ...
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...a non-profit, or just trying to keep track of your personal finances, understanding how financial statement are used is very important There are five financial statements. They are; (1) income statement; (2) retained earnings statement; (3) balance sheet; (4) statement of cash flow; (5) interrelationships of statements. An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue. The literal “bottom Line” of the statement usually shows the company’s net earnings or losses. Investors are interested in income statement because it provides useful information or predicting future net incomes. Creditors also use this type of statement to also predict future earnings. Banks lend monies on the promise they will paid back. The income statement tells banks if there is enough profit being made to repay their loan. The income statement provides basic but very vital information that can be used to make some very crucial personal or business financial decision making. The statement if retained earnings is the second statement prepared. Its purpose is to explain the changes in retained earnings from net income (or loss) and from any dividends over a period of time. This means that...
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...one essay question worth 25 points and one problem worth 35 points. Terminal Course Objectives A, B, C, D, and E are all addressed on this exam. For the multiple choice questions worth 90 points, you should know: 1. Know what information is desired by external users of financial statements 2. Know about operating activities, investing activities, and financing activities 3. Be able to calculate net cash provided by operating activities in a simple situation (by identifying which activities are operating activities) 4. Know the definitions of asset, liability, equity, revenue, and expense 5. Know what items appear under each classification in the balance sheet 6. Know how to compute Earnings per Share 7. Know the composition of a Retained Earnings statement 8. Know about a ledger account, its different parts, the rules of debit and credit, and the meaning of the term normal balance of an account 9. Know about revenue recognition principle, matching principle, and time-period assumption 10. Know the computation net income under accrual accounting (revenues - expenses) 11. Know the meaning and purpose of adjusting entries, and the different types of adjusting entries 12. Know the difference between periodic and perpetual inventory systems 13. Know how to calculate net cost of purchases when terms of payment look like, for example, 3/10 n/45 14. Know the components of cost of merchandise...
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...e. $51,000 b. Income to Controlling Interest $160,700 c. $283,000 c. Increase Accumulated Depreciation $57,000 b. Increase Accumulated Depreciation $138,000 c. $66,500 d. $2,650 b. Income to Controlling Interest $2,815,250 a. Income from TV Sales Co. $45,500 b. Dividend Income $13,000 a. Income to Controlling Interest $43,900 a. Net Income $94,400 b. Accumulated Depreciation $168,000 g. Income to Noncontrolling Interest $26,800 c. Net Income $90,000 b. NCI in NA of Temple Corp. $104,000 b. NCI in NA of Lane Co. $52,400 b. NCI in NA of Lane Co. $54,400 b. NCI in NA of Skate Co. $53,400 a. $4,710 f. $122,600 k. $375,800 b. NCI in NA of Block Corp. $25,500 d. NCI in NA of Schmid Dist. $999,000 Consolidated Retained Earnings, December 31, 20X8: $449,000 c. Retained Earnings, December 31, 20X4: $213,135 d. NCI in NA of Lane Co. $54,400 d. NCI in NA of Lane Co. $53,000...
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...Financial Statements Dave Hall ACC/290 Lisa Henderson September 16, 2013 Financial Statements In any business, the financial statements are the backbone of the financial accounting reporting within the business. The four financial statements include the income statement, balance sheet, retained earnings statement and the statement of cash flows (Kimmel, Weygandt & Kieso, 2010). These four statements provide a summary picture of the overall financial health of the company, for the period of time reported, to both internal (managers and employees) and external customers (investors and creditors). The internal and external customers can use the company’s reported financial information to make informed decisions such as investing in the company and loaning funds or providing credit to the company. Income Statement The income statement, also referred to as the profit and loss (P&L) statement, reflects how much money a business has made over a period of time (D&B, 2013). The time period reflected may be monthly, quarterly, semi-annually or annually, and is stated as such in the header of the income statement. The data within the income statement includes revenues (from the sale of the company’s products) and expenses (salaries, rent, depreciation, supplies, etc…). To calculate net income for the time period, expenses are subtracted from revenues, thus totaling net income. The income statement is very important to both internal customers (managers and employees)...
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