Accounting
Chapter 8
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Accounting Concept #9: Adequate Disclosure
o Financial statements contain all information necessary to
understand a business’s financial condition
Lesson 8-1
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Income Statement reports information for a specific period of time
Get the info from the work sheet
IS – 4 parts – heading, revenue, expenses, net income/loss
Heading: Name of business, Income Statement, For month ended
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Revenue section info comes from work sheet IS credit column
Expense section info comes from work sheet IS debit column
To make decisions have to analyze the relationship between total
expenses and net income
Component Percentage = each component/sales
Can prepare and IS with 2 sources of Revenue
See pages 178 and 179 for IS examples
Lesson 8-2
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A balance sheet reports financial info on a specific date, showing the
financial condition of a business
Financial condition refers to its financial strength
Balance sheet has 4 parts: heading, assets, liabilities, O.E.
A = L + O.E.
Assets on left side of BS
Liabilities and O.E. on right side of BS
Find info from BS columns on the work sheet
Report current capital on BS
o capital account balance + net income – drawing account = current
capital
o capital account balance – net loss – drawing account= current
capital
Sometimes want to report out all the info on how calculated current
capital
See page 184 for examples
Owner’s Equity
Capital, August 1, 20—
Net Income
Less Drawing
Capital, August 31, 20—