1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning REPORTING FINANCIAL INFORMATION The financial information needed by business managers and business owners to make informed decisions can be found in the General Ledger accounts. However, this information is very detailed and can take a long time to analyze. To make the information contained in the General Ledger accounts more useable, the information is summarized and organized into Financial Statements. 1 LESSON 7-1

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning REPORTING FINANCIAL INFORMATION The names of the Financial Statements we are currently concerned with are the Income Statement and the Balance Sheet. The Income Statement reports financial information over a specific period of time, indicating the financial progress of a business in earning a net income or a net loss. The Balance Sheet reports financial information on a specific date, indicating the financial condition of a business. 2 LESSON 7-1

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning REPORTING FINANCIAL INFORMATION If sound financial decisions are to be made, the Financial Statements must be completed with accuracy. The Financial Statements can be thought of as the story of a businesses performance. Financial Statements are always prepared at the end of the Accounting Period Cycle. The Accounting Period Cycle can be 1 month, 3 months, 6 months, or 1 year. 3 LESSON 7-1

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PREPARING FINANCIAL STATEMENTS 4 LESSON 7-1

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 Preparing an Income Statement

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 6-2 (b) 10000 (a) 71500 496400 10000 15000 11000 10000 102500 120000 20000 5000 500000 62500 356500 21300 2800 30000 881500 81500 146600356500734900525000 356500734900 496400 10000 15000 10000 31000 110000 20000 5000 500000 62500 11000 21300 2800 30000 356500 10000 71500 209900 Net Income 356500734900

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 7-1 INCOME STATEMENT INFORMATION ON A WORK SHEET page 182

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 7-1 HEADING OF AN INCOME STATEMENT 1 2 3 page 182 1.Center the name of the company on the first line. 2.Center the name of the report on the second line. 3.Center the date of the report on the third line.

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 7-1 REVENUE, EXPENSES, AND NET INCOME SECTIONS OF AN INCOME STATEMENT 1 Revenue 3 Revenue amount 4 Expenses 5 Account titles 6 Expense amount 8 Total expenses 9 Total of expenses 12 Net Income 7 Single line 11 10 Calculate net income 14 Double lines 13 Record net income 2 Account title page 183

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 7-1 COMPONENT PERCENTAGE ANALYSIS OF AN INCOME STATEMENT page 184

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 7-1 INCOME STATEMENT WITH TWO SOURCES OF REVENUE AND A NET LOSS 1 Revenue 3 Revenue amounts 2 Account titles 6 Net Loss 7 Record Net Loss 5 Total Revenue 4 Total of revenue page 185

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-2 Balance Sheet Information on a Work Sheet

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 7-2 BALANCE SHEET page 187

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 14 LESSON 7-2 HEADING OF A BALANCE SHEET page 187 1 2 3 1.Center the name of the company on the first line. 2.Center the name of the report on the second line. 3.Center the date of the report on the third line.

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 15 LESSON 7-2 ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188 4 Liabilities 1 Assets Total Liabilities8 2 Account titles 3 Asset amounts Single line 7 6 Liability amounts 5 Account titles Total of liabilities 9

16. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 7-2 OWNER’S EQUITY SECTION OF A BALANCE SHEET page 189 7 Total Liab. and Owner’s Eq.5 Total Assets 1 Owner’s Equity 2 Account title 3 Capital amount 4 Single line 6 Total of assets 8 Total of Liabilities and Owner’s Equity 9 Compare totals 10 Double lines

17. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 17 LESSON 7-2 OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET page 190 2 Beginning capital amount 6 Difference 8 Current capital amount 1 Beginning capital 3 Net Income 4 Drawing Ending capital 7 9 Total Liabilities and Owner’s Equity 5 Single line