SESSION 2 Recording Transactions & Preparing Financial Statements 9/12/2019 Flow of Accounting Data The Accounting Cycle Session 2 1 Financial Accounting Road Map Session 1: What are the financial statements and what accounts appear in them? Session 2 Current: How does information from business transactions get processed and compiled into financial statements? Session 3: Preparing Financial Statements - When should a company record revenue and expenses? 2 1 9/12/2019 DOING THE ACCOUNTING i. Identify what constitutes a business transaction and recognize common balance sheet account titles used in accounting for business transactions. ii. Apply transaction analysis to simple business transactions in terms of the accounting model: Assets = Liabilities + Stockholders' Equity iii. Determine the impact of business transactions on the balance sheet using two basic tools: Journal entries T-accounts iv. Prepare a Trial Balance and simple classified Balance Sheet and Income Statement. 3 Understanding the Business Knowing What business activities affect Financial Statements Understanding Balances in Financial Statements Knowing When to record business transactions in Financial Statements Knowing How specific business activities affect Financial Statements 4 2 9/12/2019 Financial Accounting and Reporting Conceptual Framework Objective of Financial Reporting to External Users: (Ch. 2) To provide financial information about the reporting entity that is useful to Existing and potential Investors, Creditors, Suppliers, Customers and other stakeholders Fundamental Qualitative Characteristics of Useful Information: (Ch. 2) Relevance (including materiality) and Faithful Representation Comparability and Consistency Verifiability Timeliness Understandability Elements to Be Measured and Reported: Assets, Liabilities, Stockholders’ Equity, Distributions to Owners (Ch. 2) Revenues, Expenses, Gains, and Losses (Ch. 3) Recognition, Measurement, and Disclosure Concepts: Assumptions: Separate Entity, Going Concern (Ch. 2), Accounting Period (Ch. 2-3) Principles: Measurement Basis – Historical Cost (Ch. 2); Revenue Recognition and Expense Recognition (Ch. 3) 5 Decision Outcomes: Business Activities and Transactions The Financial Accounting Cycle Decisions by Internal and External Stakeholders Provides Feedback to Manages and Performance Info to External users Data Input to Accounting Process 1. Analysis of Transactions This is The Accounting Cycle 2. The Financial Accounting Process Output of Accounting Process 3. Preparation of Financial Reports 6 3 9/12/2019 Decision Outcomes: Business Activities and Transactions Decisions by Internal and External Stakeholders Data Input to Accounting Process | | The Financial Accounting Process 1. Analysis of Business Transactions 2. Recording Accounting Transactions *** Journal Entries 3. Classifying Transactions *** Posting to Ledger Accounts 7. 5. Updating Entries 6. Verifying Updates *** *** Preparing a End of Period Adjustments *** Preparing an Adjusted Trial Balance 4. Verifying Entries Trial Balance The Accounting following Business Transactions Preparation of Financial Statements 8. Cleaning Up *** Preparing Closing Entries 9. Verifying Cleanup *** Post‐ Closing Trial Balance The Accounting at the End of Period 7 Back to the Flow of Accounting Data (“Accounting Cycle”) 1. Analysis of Accounting Transactions 2. Record journal entry ACCOUNTING ENTRIES AT TRANSACTION DATE 3. Post to ledger (t-accounts) 4. Prepare trial balance 5. Record adjusting entries 6. Prepare adjusted trial balance 7. Prepare financial statements ACCOUNTING ENTRIES AT END OF PERIOD 8. Close the books 9. Prepare post closing trial balance 8 4 9/12/2019 Step 1: Analyzing Accounting Transactions An Accounting Transaction is any activity that alters the financial position of the business and can be reliably recorded. In other words, a Transaction qualifies as an Accounting Transaction only if it alters the financial position of the company. How does a Business Transaction ALTER a Co.’s Financial Position? A change in Financial Position occurs whenever a business transaction results in a change in: Assets Liabilities and/or Equity Account balances In other words, accounting transactions are transactions that alters the Accounting Equation: Assets = Liabilities + Equity 9 What is Double Entry Accounting System? Double Entry Accounting: There are at least two components of Assets, Liabilities and/or Equity affected by a transaction. Hence there must be at least two entries Why? Accounting Equation: Assets = Liabilities + Equity Must always balance 10 5 9/12/2019 The Accounting Period Companies measure their performance over discrete time periods of equal duration Most common time period for measuring income or profits are Fiscal year (12 months) Fiscal Quarter (3 months - interim period) 11 of 49 11 How Business Transactions Affect The Accounting Equation An Illustration 12 6 9/12/2019 Linking Beginning and Ending Balance Sheets A Graphical Representation Ending Financial Position (Balance Sheet) Beginning Financial Position Balance Sheet Date: 1/1/2010 (end of previous period) Business Transactions During Fiscal 2010 Date: 12/31/2010 (end of current period) Begin of Period End of Period 1/1/2010 12/31/2010 TIME The Accounting Period (1 year) 13 Elements of the Accounting Equation A= Assets Economic resources with probable future benefits owned or controlled by the entity. L Liabilities + Debts or obligations (claims to a company’s resources) to be repaid with assets or services In future periods SE Stockholders’ Equity The financing provided by the owners and business operations. 14 7 9/12/2019 Recording Business Accounting Transactions Balancing the Accounting Equation Step 1: Ask—What was received and what was given? Identify the accounts (by title) affected and make sure at least two accounts change. Classify them by type of account. Was the account an asset (A), a liability (L), or a stockholders’ equity (SE) account? Determine the direction of the effect. Did the account increase [+] or decrease [−]? Step 2: Verify—Is the accounting equation in balance? Verify the equality of the accounting equation A = Assets L + Liabilities SE Stockholders’ Equity 15 Linking Beginning and Ending Balance Sheets A Graphical Representation Ending Financial Position (Balance Sheet) Beginning Financial Position Balance Sheet Date: 1/1/2010 (end of previous period) Date: 12/31/2010 Business Transactions During Fiscal 2010 Begin of Period End of Period 1/1/2010 12/31/2010 The Accounting Period TIME 16 8 9/12/2019 Partco - Effect Of Transactions on Accounting Equation Beginning Balance Sheet 12/13/2009 = 1/1/2010 Business Transactions during 2010 Accounting Period 17 9 Transactions Cash + Beg. Balance, 1/1/10 + 300 Assets = = = PARTCO SUPPLIES COMPANY Analysis of Transaction for 2010 (In Thousands of Dollars) +100 Accounts Prepaid + Merchandize Receivable Inventory + Rent + Equipmt +40 = + 860 b. = + 400 c. = a. d1. = = e. = d2. f. = = = = = = g. h. i. j. d3. Balance, 12/31/10 Liabilities + + + 600 Retained Income Stockholders' Equity +300 Accounts Paid–in Payable + Capital + 800 9/12/2019 Summary of Partco’s Supplies Co. Financial Performance for 2010 Revenues Net Cash From Operations Net Cash From Investing Net Cash From Financing Net Increase in Cash Beginning Cash Ending Cash $1,600 1,558 $ 42 Expenses Net Income End of Period Simplified Balance Sheet Partco Supplies Co. Cash Flow Statement As of Dec. 31 2010 Partco Supplies Co. Income Statement For the year ended Dec. 31 2010 Net Income Dividends Ending Retained Earnings Cash 396 Other Assets Total 1,346 $1,742 Liabilities & Equity Liabilities Capital Stock Partco Supplies Co. Statement of Retained Earnings For the year ended Dec. 31 2010 Beginning Retained Earnings 12/31/2010 Assets $196 0 (100) $96 $300 $396 900 300 Ret. Earnings Total 542 $1,742 $ 600 42 100 $ 542 19 Linking Beginning and Ending Balance Sheets – PARTCO SUPPLIES Statement of Cash Flows Net Cash From Operations Net Cash From Investing Net Cash From Financing Net Increase in Cash Simple Balance Sheet 1/1/2010 Assets Cash 300 Other Assets 1,400 Total $1,700 Liabilities & Equity Liabilities 800 Capital Stock 300 Ret. Earnings Total $1,700 Begin of Period 1/1/2010 600 $196 0 (100) $96 Beginning Cash $300 Ending Cash $396 Simple Balance Sheet 12/31/2010 Income Statement Revenues $1,600 Less Cost of Goods Sold 1,200 Gross Profit 400 Less Operating Expenses Expense Transactions 200During Outcome Wages of Business Depreciation Expense 20 Rent Expense 68 Miscellaneous Expense 70 Total Operating Expenses 358 Net Income $ 42 Assets Cash 396 Other Assets Period Total $1,742 Liabilities & Equity Liabilities 900 Capital Stock 300 Ret. Earnings Statement of Retained Earnings Beginning Retained Earnings Total 542 $1,742 $ 600 Net Income 42 Dividends 100 Ending Retained Earnings 1,346 $ 542 End of Period 12/31/2010 TIME 20 10 9/12/2019 Accounting Transactions - Accounts Recap: An Accounting Transaction is any activity that changes the financial position of the business, and can be reliably recorded in an Account. Financial effects of transactions are accumulated, summarized and classified into separate Accounts 21 What is a Financial Statement Account An Account is an accumulation of the dollar effects of Accounting Transactions on each component of financial statements. A separate Account exists for each asset, liability, owners’ equity (common stock, retained earnings, revenue, expenses) . * Components of Assets, Liabilities and Equity are called Accounts Assets Accounts Stockholders Equity Accounts Liabilities Accounts Common Stock & Retained Earnings Accounts Expense Accounts Revenues 22 11 9/12/2019 Typical Account Titles Accounts with “receivable” in the title are always assets; they represent amounts owed by (receivable from) customers and others to the business. Liability Accounts Asset Accounts • • • • Prepaid Expenses is always an asset; it represents amounts paid in advance by the company to others for future benefits, such as future insurance coverage, rental of property, or advertising. Title expense accounts by what was incurred or used followed by the word “expense,” except for inventory sold, which is titled Cost of Goods Sold. Accounts with “payable” in the title are always liabilities and represent amounts owed by the company to be paid to others in the future. • • • • • Cash Short-Term Investments Accounts Receivable Notes Receivable Inventory Supplies Prepaid Expenses Long-Term Investments Equipment • Buildings • Land • Intangibles • • • Accounts Payable Accrued Expenses Payable Notes Payable • Taxes Payable • Unearned Revenue • Bonds Payable Stockholder’s Equity Accts. • • • Expense Accounts Revenue Accounts Common Stock Additional Paid-in Capital Retained Earnings • • • • • Sales Revenue Fee Revenue Interest Revenue Rent Revenue Service Revenue • • • • • • • • Accounts with “unearned” in the title are always liabilities representing amounts paid in the past to the company by others who expect future goods or services from the company. • Title revenue accounts by their source followed by the word “revenue.” Cost of Goods Sold Wages Expense Rent Expense Interest Expense Depreciation Exp. Advertising Exp. Insurance Exp. Repair Expense Income Tax Exp. 23 Setting up an Account An account is represented as a simple two column table. Account Name Column 1 The Left Column Column 2 The Right Column Above table is known as a “T”-account 24 12 9/12/2019 Setting up a T-Account The left (first) column is referred to as the debit column and the right (second) column is referred to as the credit column Account Title Debit Column Credit Column The Left Column The Right Column Why just two columns? A transaction can only affect an account in one of two ways: It can either or the balance in the account. 25 Debits and Credits Accounting Equation Rules of Debit and Credit Assets Debit + = Credit - Current Assets Accts Liabilities Debit - Credit + Current Liability Accts + Stockholders’ Equity Debit - Credit + Common Stock Ret. Earnings Accts Non-cur Assets Accts Non-cur Liability Accts Revenue Accts Dividend Accts Every accounting transaction involves both a debit and a credit entry. WHY? To keep equation balanced. Expense Accts 26 13 9/12/2019 27 of 40 27 Decision Outcomes: Business Activities and Transactions Decisions by Internal and External Stakeholders Data Input to Accounting Process 1. Analysis of Business Transactions 2. Recording Accounting Transactions *** Journal Entries 3. Classifying Transactions *** Posting to Ledger Accounts The Accounting following Business Transactions 5. Updating Entries 6. Verifying Updates *** *** Preparing a End of Period Adjustments *** Preparing an Adjusted Trial Balance 4. Verifying Entries Trial Balance 7. Preparation of Financial Statements 8. Cleaning Up *** Preparing Closing Entries 9. Verifying Cleanup *** Post‐ Closing Trial Balance The Accounting at the End of Period 28 14 9/12/2019 Back to the Flow of Accounting Data (“Accounting Cycle”) 1. Understanding and Analyzing the transaction 2.Record journal entry These steps use the rules of debits and credits to record 3. Post to ledger (t-accounts) every business transaction 4. Prepare trial balance 5. Record adjusting entries 6. Prepare adjusted trial balance 7. Close the books 8. Prepare post closing trial balance 9. Prepare financial statements 29 How Do Companies Keep Track of Account Balances? Journal Entries (General Journal) T-accounts General Ledger (Collection of T-Accounts) 30 15 9/12/2019 Step 2: Record Journal Entry Accountants record transactions first in a JOURNAL a chronological record of an entity’s transactions like a logbook. Journal entries follow the same debit and credit rules 31 The Journal Entry A complete journal entry includes: • The date of the transaction • The title of the account debited (placed flush left) • The title of the account credited (indented slightly) • The dollar amount of the debit (left) • The dollar amount of the credit (right) • A short narrative of the transaction Key Items: Account Name; Amount Debited Amount Credited Company Name Date Acct. Name $Amt. Debited $Amt. Credited 32 16 9/12/2019 Business Transactions during 2010 Accounting Period 33 PARTCO SUPPLIES COMPANY Analysis of Transaction for 2010 (In Thousands of Dollars) Assets = Liabilities + Accounts Payable + = + 800 + = +1,000 Merchandise Prepaid Accounts + + Receivable Inventory + Rent + Equipmt = Cash Transactions Beg. Balance, 12/31/09 + 300 + 400 a. + 860 +40 +100 +1,000 b. c. + d2. – 200 +1,400 –1,200 84 +84 = = = –20 h. i. 600 – 1,200 (increase cost of goods sold – An expense –28 +1,250 + +1,600 (increase sales revenue) –40 – 300 = d3. e. g. Common Retained + Income Stock = d1. f. Stockholders' Equity – 40 (increase rent expense) Income Statement –1,250 200 = – 70 = – 900 = j. – 100 = Balance, 12/31/10 + 396 + 550 +660 +56 +80 = – 28 (increase rent expense) – 20 (increase depreciation expense) – 200 (increase wages expense) – 70 (increase misc. expense.) – 900 – 100 + 900 +300 (dividends) + 542 34 17 9/12/2019 Step 2: Record Journal Entry Acquisition of inventory on credit for $1 million on January 1 2010. Simplified Journal Entry of Transaction 1 1/1/2010 Dr. Cr. Debit Account Name Inventory Accounts payable Credit $1,000,000 $1,000,000 Or even more simply… 1/1/2010 Inventory Accounts Payable $1,000,000 (+ A) $1,000,000 (+ L) 36 18 h.Mi s c e l l ane ouse xpe ns e sf or2010we r epai di nf ul li nc as hf or$70, 000. 9/12/2019 How Do Companies Keep Track of Account Balances? General Ledger Collection of all T-Accounts Individual T-accounts General Journal Posting 47 Posting Transaction from the Journal to T Accounts a. Acquisition of inventory on credit for $1 million on January 1 2010. General Journal Date Account Titles and Explanation (in thousands) 1-1-10 Dr. Inventory Cr. Accounts Payable Page G1 Debit Credit 1,000 1,000 Purchase on merchandise Inventory General Ledger Account INVENTORY Debit Credit Old. Bal. 860 G1 New. Bal General Ledger Account ACCOUNTS PAYABLE Debit Credit Old. Bal 800 G1 New. Bal 48 24 9/12/2019 Step 2: Record Journal Entry b. Sales Revenue of $1.6 million was earned during the year, $1.4 million were on account (credit sales) and $200,000 were for cash. Dr. Cash Dr. Accounts Receivable Cr. Sales Revenue $ 200,000 1,400,000 $ 1,600,000 49 T – Accounts Partco Supplies Posting to T-Accounts Cash B. Bal. 300,000 b. 200,000 f. 1,250,000 Accounts Receivable Merchandize Inventory B. Bal. 860,000 a. 1,000,000 B. Bal. 400,000 f. 1,250,000 b. 1,400,000 d2. 84,000 g. 200,000 h. 70,000 i. 900,000 j. 100,000 E. Bal c. 1,200,000 E. Bal. 56,000 E. Bal. 660,000 550,0000 Warehouse Equipment E. Bal 396,000 Prepaid Rent B. Bal. 40,000 d1. 40,000 d2. 84,000 d3. 28,000 Accum. Depreciation Equipment B. Bal. B. Bal. 100,000 e. E. Bal. 100,000 E. Bal. 20,000 Accounts Payable i. 900,000 B. Bal. 800,000 a. 1,000,000 E. Bal. Sales Revenue B. Bal. 0 b. 1,600,000 E. Bal. 1,600,000 900,000 Rent Expense Cost of Goods Sold B. Bal. 0 d1. 40,000 d3. 28,000 B. Bal. 0 c. 1,200,000 E. Bal. 68,000 E. Bal. 1,200,000 E. Bal 200,000 Depreciation Expense B. Bal. e. E. Bal 0 70,000 E. Bal. 70,000 Wages Expense B. Bal. 0 g. 200,000 Miscellaneous Expense B. Bal. h. 0 20,000 Common Stock Bal. 300,000 E. Bal. 300,000 Dividends Bal. 0 j. 100,000 E. Bal. 100,000 0 20,000 20,000 Retained Earnings B. Bal. 600,000 E. Bal. 600,000 50 25 9/12/2019 Pit Stop: T-Acount Practice Problem Notes payable has a normal beginning balance of $40,200 and cash had a balance of $15,000. During the period new borrowings total $100,000 and payments on loans total $20,600. Use a T-account to determine the correct ending balance in notes payable. Is the Normal Balance of $40,200 Dr. or Cr.? Cash Dr. Notes Payable Cr. Dr. Cr. 51 Pit Stop: Debits and Credits Practice Problem Beginning Accounts Receivable = 650 Credit Sales = 3,000 Ending Accounts Receivable = 420 Using a T-account, determine cash collections from customers for accounts receivables. Accounts Receivable 650 3,000 420 Sales Rev. Credit 3,000 ? Cash Collections ? = 3,230 Cash $ 3,230 (650+3000) – Cash Collections = 420 (650+3000) – 420 = 3,230 Cash Collections 52 26 9/12/2019 Back to the Flow of Accounting Data (“Accounting Cycle”) 1. Understand transaction 2. Record journal entry 3. Post to ledger (t-accounts) 4. Prepare trial balance 5. Record adjusting entries 6. Prepare adjusted trial balance 7. Prepare financial statements 8. Close the books 53 Trial Balance Since total debits = total credits for every transaction Sum of all debit balances = Sum of all credit balances. Not equal only if 1. There was an error in a journal entry and Change in Assets ≠ Change in (Liabilities + Equity) 2. Error in posting or 3. Error in calculating account balances. 54 27 9/12/2019 Step 4: The ‘Normal’ Balance of Accounts on the Trial Balance DEBIT CREDIT Assets……………………………. Liabilities…………………………. Common Stock………………….. Retained Earnings………………. Treasury Stock …………………... Dividends…………………………. Revenues.……………………….. Expenses……………………….… 56 28 9/12/2019 How Do Companies Keep Track of Account Balances? Individual T-accounts General Journal General Ledger Collection of all T-Accounts Posting 58 29 9/12/2019 T – Accounts Partco Supplies Cash B. Bal. 300,000 b. 200,000 f. 1,250,000 Accounts Receivable Merchandize Inventory B. Bal. 860,000 a. 1,000,000 B. Bal. 400,000 f. 1,250,000 b. 1,400,000 d2. 84,000 g. 200,000 h. 70,000 i. 900,000 j. 100,000 E. Bal c. 1,200,000 E. Bal. 56,000 E. Bal. 660,000 550,0000 Warehouse Equipment E. Bal 396,000 Prepaid Rent B. Bal. 40,000 d1. 40,000 d2. 84,000 d3. 28,000 Accum. Depreciation Equipment B. Bal. B. Bal. 100,000 e. E. Bal. 100,000 E. Bal. 20,000 Accounts Payable i. 900,000 B. Bal. 800,000 a. 1,000,000 E. Bal. Sales Revenue B. Bal. 0 b. 1,600,000 E. Bal. 1,600,000 900,000 Rent Expense Cost of Goods Sold B. Bal. 0 d1. 40,000 d3. 28,000 B. Bal. 0 c. 1,200,000 E. Bal. 68,000 E. Bal. 1,200,000 E. Bal 200,000 Depreciation Expense B. Bal. e. E. Bal 0 70,000 E. Bal. 70,000 Wages Expense B. Bal. 0 g. 200,000 Miscellaneous Expense B. Bal. h. 0 20,000 Common Stock Bal. 300,000 E. Bal. 300,000 Dividends Bal. 0 j. 100,000 E. Bal. 100,000 0 20,000 20,000 Retained Earnings B. Bal. 600,000 E. Bal. 600,000 59 30 9/12/2019 61 Decision Outcomes: Business Activities and Transactions Decisions by Internal and External Stakeholders Data Input to Accounting Process 1. Analysis of Business Transactions 2. Recording Accounting Transactions *** Journal Entries 3. Classifying Transactions *** Posting to Ledger Accounts The Accounting following Business Transactions 5. Updating Entries 6. Verifying Updates *** *** Preparing a End of Period Adjustments *** Preparing an Adjusted Trial Balance 4. Verifying Entries Trial Balance 7. Preparation of Financial Statements 8. Cleaning Up *** Preparing Closing Entries 9. Verifying Cleanup *** Post‐ Closing Trial Balance The Accounting at the End of Period 62 31 9/12/2019 Back to the Flow of Accounting Data (“Accounting Cycle”) 1. Understand transaction 2. Record journal entry 3. Post to ledger (t-accounts) 4. Prepare trial balance 5. Record adjusting entries 6. Prepare adjusted trial balance 7. Prepare Prepare financial financial statements statements 8. Close the books 9. Prepare post closing trial balance 64 32 9/12/2019 Step 9: Prepare Financial Statements Very easy to create financial statements once trial balance is prepared. Just classify data from trial balance and assign to: • Income Statement (revenues and expenses) • Balance Sheet (assets, liabilities, owners’ equity) • Statement of Retained Earnings (dividends) Calculate ending RE on balance sheet using either (1) balance sheet equation or (2) statement of retained earnings 65 Partco Supplies Trial Balance As of December 31, 2010 Debits Cash Accounts Receivable Merchandise Inventory Prepaid Rent Equipment Acc. Depreciation-Equipment Accounts Payable Common Stock Retained Earnings Dividends Cost of goods sold Wages Expense Rent Expense Depreciation Expense Miscellaneous Expense Sales Revenue Credits 396,000 550,000 660,000 56,000 100,000 20,000 900,000 300,000 600,000 100000 1200000 200000 68000 20000 70000 _________ 1,600,000 Total $3,420,000 3,420,000 66 33 9/12/2019 Step 9: Prepare Financial Statements Partco Supplies Company Income Statement December 31 2010 Sales Revenue Cost of goods sold Gross Profit Operating Expenses: Wages Expense Rent Expense Depreciation Expense Miscellaneous Expense Total Operating Expenses Net Income $ 1,600 1,200 400 200 68 20 70 358 $ 42 69 Step 9: Prepare Financial Statements Partco Supplies Statement of Retained Earnings For Period Ended December 31, 2010 Retained Earnings Jan. 1, 2010 $ 600 Net Profit 42 Less Dividends (100) Retained Earnings Dec. 31, 2010 $ 542 70 35 9/12/2019 Partco Supplies Trial Balance As of December 31, 2010 Credits Debits Cash Accounts Receivable Merchandise Inventory Prepaid Rent Equipment Acc. Depreciation-Equipment Accounts Payable Common Stock Retained Earnings - Ending Beginning Dividends Cost of goods sold Wages Expense Rent Expense Depreciation Expense Miscellaneous Expense Sales Revenue 396,000 550,000 660,000 56,000 100,000 20,000 900,000 300,000 542,000 600,000 100000 1200000 200000 68000 20000 70000 _________ 1,600,000 Total $3,420,000 $1,762,000 3,420,000 1,762,000 71 Partco Supplies Balance Sheet As of December 31, 2010 ASSETS Cash Accounts Receivable Merchandise Inventory Prepaid Rent Total Current assets Property, Plant & Equipment Equipment Less Acc. Depreciation-Equipment Net Prop. Plant Equip. TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities Accounts Payable Equity Common Stock Retained Earnings Total Equity TOTAL LIABILITIES AND EQUITY $396,000 550,000 660,000 56,000 1,662,000 100,000 (20,000) 80,000 $1,742,000 900,000 300,000 542,000 842,000 $1,742,000 Notice that Balance sheet has no revenues, expenses or dividends. Why? 72 36 9/12/2019 73 Exercise Qn. What is the amount of Total Assets • • Recall that Assets = Liabilities + Equity 74 37