© 2015 Cengage Learning. All Rights Reserved. LESSON 4-3 Financial Statements for a Departmental Merchandising Business Learning Objectives LO8 Prepare financial statements for a departmentalized merchandising business. © 2015 Cengage Learning. All Rights Reserved.

Income Statement with Departmental Margin Lesson 4-3 Income Statement with Departmental Margin LO8 A financial statement showing the revenue and expenses for a fiscal period is called an income statement. Statement Heading Info from Departmental Margin Statement Indirect Expenses from Adjusted Trial Balance Income Taxes & Net Income Vertical Analysis Ratios © 2015 Cengage Learning. All Rights Reserved.

Statement of Stockholders’ Equity Lesson 4-3 Statement of Stockholders’ Equity LO8 A financial statement that shows changes in a corporation’s ownership for a fiscal period is called a statement of stockholders’ equity. Earnings distributed to stockholders are called dividends. A statement of stockholders’ equity contains two major sections: 1. Capital stock. Total shares of ownership in a corporation are called capital stock. 2. Retained earnings. An amount earned by a corporation and not yet distributed to stockholders is called retained earnings. © 2015 Cengage Learning. All Rights Reserved.

Statement of Stockholders’ Equity Lesson 4-3 Statement of Stockholders’ Equity LO8 1 2 3 4 5 1. Write the heading. 4. Complete the retained earnings section. 2. Prepare the capital stock section. 5. Add capital stock and ending retained earnings to determine the ending total stockholders’ equity. 3. Enter the beginning balance of retained earnings. © 2015 Cengage Learning. All Rights Reserved.

© 2015 Cengage Learning. All Rights Reserved. Lesson 4-3 Balance Sheet LO5 A financial statement that reports assets, liabilities, and owners’ equity on a specific date is called a balance sheet. Asset and liability data come from the adjusted trial balance. Data for the stockholders’ equity come from the statement of stockholders’ equity. © 2015 Cengage Learning. All Rights Reserved.

Statement of Cash Flows Lesson 4-3 Statement of Cash Flows LO8 The cash receipts and cash payments of a company are called cash flow. A financial statement that summarizes cash receipts and cash payments resulting from business activities during a fiscal period is called a statement of cash flows. The cash flow statement is divided into three sections of activities. © 2015 Cengage Learning. All Rights Reserved.

Statement of Cash Flows Lesson 4-3 Statement of Cash Flows LO8 The cash receipts and payments necessary to operate a business on a day-to-day basis are called operating activities. Cash receipts and cash payments involving the sale or purchase of assets used to earn revenue over a period of time are called investing activities. Cash receipts and payments involving debt or equity transactions are called financing activities. © 2015 Cengage Learning. All Rights Reserved.

Lesson 4-3 Audit Your Understanding 1. Where does Whiley obtain the information to prepare the indirect expenses section of the income statement? ANSWER Account titles and balances are obtained from the adjusted trial balance. © 2015 Cengage Learning. All Rights Reserved.

Lesson 4-3 Audit Your Understanding 2. From where is the information to prepare the direct expenses section of the income statement obtained? ANSWER Totals are obtained from the departmental margin statements. © 2015 Cengage Learning. All Rights Reserved.

Lesson 4-3 Audit Your Understanding Where does Whiley obtain the stockholders’ equity amounts reported on the balance sheet? ANSWER The totals of capital stock and retained earnings are obtained from the statement of stockholders’ equity. © 2015 Cengage Learning. All Rights Reserved.