1
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
2
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
3
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
4
PREPARING FINANCIAL STATEMENTS
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
LESSON 7-1
Preparing an
Income Statement
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
496400
10000
15000
10000
102500
120000
(a)
(b)
10000
31000
110000
71500
10000
20000
5000
500000
20000
5000
500000
62500
62500
356500
356500
21300
(b)
10000
(a)
71500
2800
30000
11000
881500 881500
Net Income
81500
21300
10000
2800
30000
71500
11000
81500 146600 356500 734900 525000
209900
209900
356500 356500 734900 734900
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
7
INCOME STATEMENT INFORMATION
ON A WORK SHEET
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 182
LESSON 7-1
8
HEADING OF AN INCOME STATEMENT
page 182
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
9
REVENUE, EXPENSES, AND NET INCOME
SECTIONS OF AN INCOME STATEMENT page 183
7
Revenue
1
Expenses
4
Account titles
5
Total expenses
8
2
Single line
3
Account title
6
Revenue amount
Expense amount
9
Total of expenses
12 Net Income
11 Single line
14 Double lines
13 Record net income
10 Calculate net income
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
10
COMPONENT PERCENTAGE ANALYSIS
OF AN INCOME STATEMENT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 184
LESSON 7-1
11
INCOME STATEMENT WITH TWO SOURCES
page 185
OF REVENUE AND A NET LOSS
5
Revenue
Account titles
Total Revenue
1
2
3
Revenue amounts
4
Net Loss
Total of revenue
6
7
Record Net Loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-1
LESSON 7-2
Balance Sheet Information
on a Work Sheet
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
13
BALANCE SHEET
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 187
LESSON 7-2
14
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.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-2
15
ASSETS AND LIABILITIES
SECTIONS OF A BALANCE SHEET
page 188
Liability amounts
Account titles
1
4
Assets
8
Account titles
3
5
Liabilities
Total Liabilities
Single line
2
6
7
Total of liabilities
Asset amounts
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
9
LESSON 7-2
16
OWNER’S EQUITY SECTION OF A
BALANCE SHEET
1
Owner’s Equity
2
Account title
Total of assets
5
4
page 189
Single line
Capital amount
3
6
7
Total Assets
Compare totals
Total Liab. and
Owner’s Eq.
9
10 Double lines
Total of Liabilities and Owner’s Equity
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
8
LESSON 7-2
17
OWNER’S EQUITY REPORTED IN DETAIL
page 190
ON A BALANCE SHEET
3 Net Income
1
Current capital amount
Beginning capital
Difference
4 Drawing
5
9
6
2
Beginning capital amount
7 Ending capital
8
Single line
Total Liabilities and Owner’s Equity
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-2