financial statements for a corporation. 2 financial statements for a corporation revisiting...
TRANSCRIPT
Financial Statements for a Corporation
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Revisiting accounting concepts:Adequate Disclosure – provide accurate financial informationConsistent Reporting – reported the same way each fiscal period
Income statement – reports revenue, cost of merchandise sold, gross profit on sales, expenses, and net income/loss
Balance sheet – reports assets, liabilities, and stockholders’ equity on a specific date
Statement of stockholders’ equity – reports changes in a corporation’s ownership for a fiscal period
Statement of cash flows – report summarizing cash receipts and payments during a fiscal period
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Income statement for a sole proprietorship
Income statement for a corporation
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Net sales – total sales less sales discount and sales returns and allowances
Cost of merchandise sold – the original price of all merchandise sold during a fiscal period
Gross profit on sales – revenue remaining after cost of merchandise sold is deducted from net sales (used to determine how effectively business is buying and selling merchandise)
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6 LESSON 15-1
6. Contra account amounts
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66 7788 99
1. Heading
7. Contra account total
3. Title of revenue account 8. Net Sales
4. Sales amount 9. Net sales amount
5. Less contra accounts
2. Revenue section
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7 LESSON 15-1
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1. Cost of Merchandise Sold section
2. Beginning inventory
3. Purchases section
4. Total cost of merchandise available for sale
5. Ending inventory
6. Cost of merchandise sold
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7. Component percentage
6. Double lines
5. Net Income after Federal Income Tax
4. Less Federal Income Tax Expense
3. Net Income before Federal Income Tax
2. Expenses section
1. Gross Profit on Sales
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Acceptable component percentages: determined by making comparisons with previous fiscal periods as well as with industry standards published by industry organizations
Actions to correct unacceptable percentages: – the goal of any business is to earn an acceptable net income; when unacceptable percentages exist, management must take action
Examples:1. Increase sales revenue (how?)2. Decrease cost of merchandise (how?)3. Small increase in sales, small decrease in cost4. Review individual expenses
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Financial ratio – a comparison between two items of financial information
Earnings per share – the amount of net income after federal income tax belonging to a single share of stock (one of the most widely used measure of a corporation’s financial performance)
Price-earnings ratio (P-E ratio) – the relationship between the market value per share and earnings per share of stock (lower = sluggish growth; higher = dynamic growth)
11 LESSON 15-2
Price-EarningsRatio
=Earnings
perShare
÷Market Price
per Share
Earningsper Share
=Number of
SharesOutstanding
÷Net Incomeafter FederalIncome Tax
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Earnings per Share
Price-Earnings Ratio
$32.13=2,500÷$80,313.95
10.7=$32.13÷$345.00
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2 part: capital stock and retained earnings
Par value – a value assigned to a share of stock and printed on the stock certificate
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1. Heading
2. Capital Stock and Par Value
5. Total stock issued at the end of the year
3. Stock at the beginning of the year
4. Stock issued during the year
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4. Dividends declared
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2. Beginning balance
7. Total stockholders’ equity6. Ending balance3. Net income after federal
income tax
5. Increase in retained earnings1. Retained Earnings
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Balance sheet for a sole proprietorship
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(continued on next slide)
Balance sheet for a corporation
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slide)
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Information obtained from the work sheet AND equity statement
Business having both current and plant assets: list separate
Assets with contra accounts have: (1) asset balance; (2) contra account balance; (3) book value listed (next slide)
Current liabilities – liabilities due within a short time (usually one year)
Long-term liabilities – liabilities owed for more than a year
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3. Book value of accounts receivable
4. Remaining current asset accounts1. Heading
2. Begin assets section 5. Current assets
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551. Write the heading Plant Assets.
2. Calculate the book value of office equipment.
3. Use the same procedure to calculate the book value of store equipment.
4. Calculate total plant assets.
5. Calculate total assets.
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1. Heading
2. Account title and amount of each current liability
3. Total liabilities
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Some corporations call the stockholders’ equity section owner’s equity
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5. Total liabilities and stockholders’ equity
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2. Capital stock
1. Stockholders’ Equity
3. Retained earnings
4. Total stockholders’ equity
6. Double rules66