[PDF] [PDF] Chapter 07: Financial Statements

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Chapter 07:

Financial Statements

McGraw-Hill/IrwinCopyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Financial Statements

statements. Once journal entries have been recorded and posted, financial statements are automatically calculated by Peachtree.

In Chapters 1 through 6, you explored the sample company, Bellwether Garden Supply. You learned how software. You also journalized and posted various types of transactions.

Beginning in Chapter 9, you will learn how to use these features to set up service businesses. Then, in Chapter 12, you will set up merchandising businesses.

In Parts 2 through 4 of the textbook, you set up 12 businesses which include service, merchandising, nonprofit, and manufacturing businesses.

7-2

Balance Sheet, p. 226

A balance sheet is a list of assets,

liabilities, and capital of a business entity as of a specific date, such as the last day of an accounting period or the last day of the year.

The March 31, 2012 balance sheet is

shown on pages 233-234. 7-3

Gross Profit by Departments, pp. 226-227

A departmentalized accounting system provides

information that management can use to evaluate the profitability or cost effectiveness of

Departments financial statement is a custom

report designed for Bellwether that details each -to-date gross profit as of the current month.

The Year-to-Date Departmental Gross Profit

Totals are shown on page 235.

7-4

Income Statement, p. 227

The income statement is a summary of the revenues and expenses a company accrues over a period of time, such as an accounting period or a year. Only revenue and expense accounts are displayed on the income statement. also includes percentage-of-revenue columns for the current month. The percentages shown for each expense, total expenses, and net income (or net loss) indicate the relationship of each item to total revenues.

The income statement is shown on page 237.

7-5

Statement of Cash Flow, p. 227

The statement of cash flow summarizes the effects

on cash of the operating, investing, and financing activities of a company for a period and the year to date.

The statement of cash flow reports cash

transactions associated with the purchase or sale of fixed assets (Investing Activities) and cash paid to or received from creditors and owners (Financing Activities).

The statement of cash flow is shown on page 239.

7-6

Statement of Retained Earnings, p. 228

The statement of retained earnings shows

beginning and ending retained earnings amounts, adjustments made to retained earnings within the report period, and the detail for all Equity-gets closed accounts. The retained earnings balance is the cumulative, lifetime earnings of the company less its cumulative losses and dividends.

The Statement of Retained Earnings is shown

on page 240. 7-7

Statement of Changes in Financial

Position, p. 228

The statement of changes in financial position

position that may not be obvious from other financial statements. The Statement of

Changes in Financial Position s shown on page

241.

Statement of Changes in Financial Position

Peachtree includes the Statement of Changes in Financial Position even though current accounting standards require that a statement of cash flows is required as part of a full set of financial statements in place of a statement of changes in financial position. 7-8

Interrelationship of Financial Statements,

p. 228-229 No single financial statement tells the entire story.

The income statement indicates how much

revenue a business has earned during a specific period of time, but it says nothing about how much of that amount has or has not been received in cash. For information about cash and accounts receivable, you have to look at the balance sheet, statement of cash flow, and statement of changes in financial position. 7-9

Peachtree Tip

Since the Exercise 6-2 backup (textbook page 220)

includes all the data necessary for the financial statements, there is no need to back up in Chapter 7. Do notdelete the Exercise 6-2.ptb file. It is used for activities in Chapters 16-18 (Part 4). 7-10

Backing Up Chapter 7

Backup Name

Excel (.xlsx) and Adobe (.pdf)

KB

Page No.

Chapter 7.ptb (optional)

3,702 KB

242

Chapter 7_Financial Statements.xlsx

37 KB
243

Chapter 7_Balance Sheet.pdf

12 KB 244

Chapter 7_Income Statement.pdf

14 KB 244

Chapter 7_Dept Gross Profit Total.pdf

8 KB 244

Chapter 7_Statement of Cash Flow.pdf

11 KB 244

Chapter 7_Statement of Retained Earnings.pdf

7 KB 244

Chapter 7_Statement of Changes in Financial

Position.pdf

11 KB 244
7-11

Glossary of Terms

Chapter 7

7-12

Net Income, p. 227

A net income results when revenues

exceed expenses. 7-13

Net loss, p. 227

A net loss results when expenses exceed

revenues. 7-14

Masking, p. 235

A feature included in Peachtree called

masking allows you to departmentalize financial statements. Masking is the ability to limit information on the report to a single division, department, location, or type code. 7-15

Going to the Net, p. 245

Access the article How to Value Stocks: How to

Read a Balance Sheet at

read-a-balance-sheet.aspx

Read the article. Answer the following questions.

What are liquid assets?

What are the liquid assets called on the balance

sheet?

In the More on reading a balance sheet section,

link to two other sites. Define each link; include the website addresses in your answer. 7-16

Analysis Questions, p. 248

1.How are the income statement and

balance sheet related to each other?

2.Using Bellwether as an example, what

cash accounts does the statement of cash flow report?

3.Does the statement of cash flow use

information from both the balance sheet and income statement?

¾The answer is on the next slide.

7-17

Answer to Analysis Questions

The financial statements work together. No single financial statement tells the entire story. The income statement indicates how much revenue a business has earned during a specific period of time, but it says nothing about how much of that amount has or has not been received in cash. For information about cash and accounts receivable, we have to look at the balance sheet, statement of cash flow, and statement of changes in financial position.

1.The net income (or net loss) from the income statement is on the balance

(or + Net Income) = Total Capital.

2.The total of all the cash accounts on the Balance Sheet (Petty Cash, Cash

on Hand, Regular Checking Account, Payroll Checking Account, Savings Account, and Money-Market Fund) is shown as the Cash Balance at End of

Period on the statement of cash flow.

3.Yes, the statement of cash flow uses information from both the balance

sheet and income statement. 7-18

Assessment Rubric, p. 248

ReportDateMenuWindow

Balance SheetMarch

31, 2012

Reports & Forms;

Financial Statements

Or, Find a Report area of

Business Status

Navigation Center.

Income

Statement

For the

three months ended March

31, 2012

Reports & Forms,

Financial Statements

Or, Find a Report area of

Business Status

Navigation Center.

Income Stmnt 7-19

Online Learning Center

¾Go online to www.mhhe.com/yacht2012for additional resources. Link to Student Edition, select Chapter 7. oInteractive Testing oGlossary of Terms oNarrated PowerPoints oAssessment Rubricquotesdbs_dbs20.pdfusesText_26