copyright © 2001 by m. ray gregg. all rights reserved. 1 using columns on financial statements an...
TRANSCRIPT
Copyright © 2001 by M. Ray Gregg. All rights reserved. 1
Using Columns on Financial Statements
an out of class lesson for students in Principles ofFinancial Accounting I
Copyright © 2001 by M. Ray Gregg. All rights reserved. 2
Introduction
With the presentation of the “debit/credit” process in Chapter 2, students encounter TWO columns in journals, in ledgers, on trial balances, on work sheets, and in working papers designed to prepare financial statements. No wonder that some students (incorrectly) conclude the columns on financial statements are called “debit” and “credit.” They are NOT.
Copyright © 2001 by M. Ray Gregg. All rights reserved. 3
Columns on Financial Statements
The columns on financial statements are for the preparer’s and user’s convenience in displaying financial information. Again, they are NOT called debit and credit. In fact, it is sometimes useful to have three or four columns to present the financial information.
Generally, the column at the far right is for grand totals – major totals like total assets, total liabilities, etc.
Copyright © 2001 by M. Ray Gregg. All rights reserved. 4
Showing Your WorkWhen one has a calculation to make, move one column to the left, make the calculation, and show the result in the column to the right.
Showing the result on the same line will not require it to be “named.” Showing the result on the NEXT line would require an appropriate title for the information.
Pictures are usually better than words. Be sure to check out the examples.
Click forexample
Click forexample
Click forexample
Copyright © 2001 by M. Ray Gregg. All rights reserved. 5
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,234Accounts Receivable 5,678Supplies 910Prepaid Insurance 1,112Total Current Assets $8,934Long-Term AssetsEquipment $131,415Less: Accumulated Depreciation 1,617 129,798
Total Assets $129,798
Copyright © 2001 by M. Ray Gregg. All rights reserved. 6
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,233Accounts Receivable 5,678Supplies 910Prepaid Insurance 1,112Total Current Assets $8,933Long-Term AssetsEquipment $131,415Less: Accumulated Depreciation 1,617 129,798
Total Assets $129,798
Move over to make calculation
Move over to make calculation
return toexplanation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 7
Showing Your WorkWhen one has a calculation to make, move one column to the left, make the calculation, and show the result in the column to the right.
Showing the result on the same line will not require it to be “named.” Showing the result on the NEXT line would require an appropriate title for the information.
Pictures are usually better than words. Be sure to check out the examples.
Click forexample
Click forexample
Click forexample
Copyright © 2001 by M. Ray Gregg. All rights reserved. 8
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,233Accounts Receivable 5,678Supplies 910Prepaid Insurance 1,112Total Current Assets $8,933Long-Term AssetsEquipment $131,415Less: Accumulated Depreciation 1,617 129,798
Total Assets $129,798Result on the sameline does NOTneed a namereturn to
explanation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 9
Showing Your WorkWhen one has a calculation to make, move one column to the left, make the calculation, and show the result in the column to the right.
Showing the result on the same line will not require it to be “named.” Showing the result on the NEXT line would require an appropriate title for the information.
Pictures are usually better than words. Be sure to check out the examples.
Click forexample
Click forexample
Click forexample
Copyright © 2001 by M. Ray Gregg. All rights reserved. 10
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,233Accounts Receivable 5,678Supplies 910Prepaid Insurance 1,112Total Current Assets $8,933Long-Term AssetsEquipment $131,415Less: Accumulated Depreciation 1,617 129,798
Total Assets $129,798
Total on NEXT line needs a name
return toexplanation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 11
Showing Your WorkWhen one has a calculation to make, move one column to the left, make the calculation, and show the result in the column to the right.
Showing the result on the same line will not require it to be “named.” Showing the result on the NEXT line would require an appropriate title for the information.
Pictures are usually better than words. Be sure to check out the examples.
Click forexample
Click forexample
Click forexample
Click formore explanation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 12
Using THREE Columns
Using three columns can provide even MORE information. Should we just give the Trial Balance to someone interested in our financial statements??? Certainly not! We should provide the information in a clear, useable form.
Remember the columns are NOT debit and credit, so don’t be confused by using three columns. Have a calculation to make? Move over a column and take the result back to the column on the right.
Copyright © 2001 by M. Ray Gregg. All rights reserved. 13
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Copyright © 2001 by M. Ray Gregg. All rights reserved. 14
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Move over to make a calculation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 15
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Move over to make another calculation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 16
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
The resultis “book value”
of building
Copyright © 2001 by M. Ray Gregg. All rights reserved. 17
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Move over to make another calculation
Copyright © 2001 by M. Ray Gregg. All rights reserved. 18
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
The resultis “book value”
of equipment
Copyright © 2001 by M. Ray Gregg. All rights reserved. 19
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Sum thesethree toget total
LT assets.
Copyright © 2001 by M. Ray Gregg. All rights reserved. 20
Some CompanyBalance Sheet
December 31, 20xx
Current AssetsCash $1,000Accounts Receivable 4,500Prepaid Insurance 500Total Current Assets $6,000Long-Term AssetsLand $40,000Building $140,000Less: Accumulated Depreciation 76,000 64,000Equipment $50,000Less: Accumulated Depreciation 18,000 32,000 136,000Total Assets $142,000
Total Current Assets+
Total LT Assets=Total Assets
Copyright © 2001 by M. Ray Gregg. All rights reserved. 21
Conclusion
Thanks for completing this out-of-class lesson. I hope you understood it and hope that it will be beneficial to you. I would appreciate your comments or suggestions about its effectiveness.