Accounting Principle

Form of Financial Statement

1. 1.      Income Statement

Income Statement presents the revenues and expenses and resulting net income or net loss for a specific period of time.



Example :

SCHWARZCORP Income Statement For the Month Ended December 31, 2010
Revenues
Service revenue		$5,800
Expenses
Salaries expense	$950
Rent expense	$650
Advertising expense	$300
Utilities expense	$200
Total expenses		$2,100
Net Income		$3,700

1. Owner’s Equity Statement

Owner’s Equity Statement summarizes the changes in owner’s equity for a specific period of time.



Example :

SCHWARZCORP Owner’s Equity Statement For the Month Ended December 31, 2010
S. Michael, Capital, July 1
Investment	$16,550
Net Income	$3,700	$20,250
Drawings		$1,500
S. Michael, Capital, December 31		$18,750

1. 3.      Balance Sheet

Balance Sheet reports the assets, liabilities, and owner’s equity at a specific date.



Example :

SCHWARZCORP Balance Sheet December 31, 2010
Assets
Cash	$9,900
Accounts Receivable	$1,300
Supplies	$2,150
Equipment	$9,250
Total Assets	$22,600
Liabilities and Owner’s Equity
Liabilities
Accounts payable	$3,850
Owner’s Equity
S. Michael, Capital	$18,750
Total Liabilities and owner’s equity	$22,600

1. Statement of Cash Flows

Statement of Cash Flows summarizes information abaout the cash inflows (receipts) and outflows (payments) for a specific period of time.



Example :

SCHWARZCORP Statement of Cash Flows For the Month Ended December 31, 2010
Cash Flows from operating activities
Cash receipts from revenues		$4,000
Cash payments for expenses		($2,100)
Net cash provided by operating activities		$1,900
Cash flows from investing activities
Purchase of equipment		($9,250)
Cash flows from financing activities
Investments by owner	$18,750
Drawings by owner	($1,500)	$17,250
Net increase in cash		$9,900
Cash at the beginning of the period		$0
Cash at the end of the period		$9,900

Reference :

Weygant, Kieso, Kimmel 2002, Accounting Principle 6^th Edition. Canada: John Wiley & Sons, Inc.