Accounting
in Business
CHAPTER
1
PowerPoint Slides to accompany
Fundamental Accounting Principles, 14ce
Prepared by
Joe Pidutti, Durham College
© 2013 McGraw-Hill Ryerson Limited.
Learning Objectives
Describe the purpose and importance of
accounting. (LO1)
Describe forms of business organization.
(LO2)
Identify users and uses of, and
opportunities in, accounting. (LO3)
Identify and explain why ethics and social
responsibility are crucial to accounting.
(LO4)
1.
2.
3.
4.
2
© 2013 McGraw-Hill Ryerson Limited.
Learning Objectives
Identify, explain, and apply accounting
principles. (LO5)
Identify and explain the content and
reporting aims of financial statements.
(LO6)
Analyze business transactions by applying
the accounting equation. (LO7)
Prepare financial statements reflecting
business transactions. (LO8)
5.
6.
7.
8.
3
© 2013 McGraw-Hill Ryerson Limited.
What is Accounting?
•
•
Accounting is an information system that
identifies, measures, records, and
communicates information that has
relevance and is a faithful representation of
an organization’s economic activities.
Its objective is to help people make better
decisions.
4
© 2013 McGraw-Hill Ryerson Limited.
(LO1)
What is Recordkeeping?
•
•
Recordkeeping, or bookkeeping, is the part
of accounting that involves recording
economic transactions, either electronically
or manually.
Accounting involves the recordkeeping
process but is much more.
5
© 2013 McGraw-Hill Ryerson Limited.
(LO1)
Forms of Organization
•
•
•
Sole Proprietorship
Partnership
Corporation
6
© 2013 McGraw-Hill Ryerson Limited.
(LO2)
Sole Proprietorships
•
•
•
•
•
•
One owner
Separate entity for accounting purposes
Not a separate legal entity from the
owner
Unlimited liability
Limited life
Owner taxed on profits
7
© 2013 McGraw-Hill Ryerson Limited.
(LO2)
Partnerships
•
•
•
•
•
•
Two or more owners
Separate entity for accounting purposes
Not a separate legal entity from the
owners
Unlimited liability
Limited life
Owners taxed on profits
8
© 2013 McGraw-Hill Ryerson Limited.
(LO2)
Corporations
•
•
•
•
•
•
One or more owners
Separate entity for accounting purposes
Separate legal entity from the owner(s)
Limited liability
Unlimited life
Corporation taxed on profits
9
© 2013 McGraw-Hill Ryerson Limited.
(LO2)
Users of Accounting Information
•
Accounting is a service activity that
provides information to help internal and
external users make decisions.
10
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
External Users
External users of accounting information are
not involved in running the organization.
They include:
• Lenders
• Shareholders
• Governments
• Consumer groups
• External auditors
• Customers
3
11
© 2013 McGraw-Hill Ryerson Limited.
(LO )
External Reporting
•
•
•
•
Reports for external users are usually in the
form of financial statements.
The information in the statements needs to
be relevant and faithfully represented.
Generally accepted accounting principles
(GAAP)are the underlying concepts that
make up acceptable accounting practices.
GAAP are important in increasing the
usefulness of financial statements to users.
12
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Internal users
•
•
Internal users are involved in managing
and operating an organization.
Accounting provides information to these
users to help them improve the efficiency
and effectiveness of the organization.
13
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Typical Questions Asked by Internal
Users
•
•
•
•
•
What are the manufacturing expenses per
unit of product?
What is the most profitable mix of services?
What level of revenues is necessary to show
net income?
Which service activities are most profitable?
Which expenses change with a change in
revenue?
14
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Accounting Opportunities
Broad fields of accounting include:
• Financial accounting
• Managerial accounting
• Taxation
• Accounting-related fields
15
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Accounting Opportunities
Accountants may work as:
• Private accountants
• Public accountants
• Government accountants
16
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Professional Certification
Professional certifications in Canada:
• Certified General Accountant (CGA)
• Certified Management Accountant (CMA)
• Chartered Accountant (CA)
17
© 2013 McGraw-Hill Ryerson Limited.
(LO3)
Ethics and Social Responsibility
•
•
•
Ethics are beliefs that differentiate right
from wrong.
Ethics and ethical behaviour are important
to the accounting profession and to those
who use accounting information.
Ethical practices build trust, which
promotes loyalty and long-term
relationships with customers, suppliers,
employees, and investors.
18
© 2013 McGraw-Hill Ryerson Limited.
(LO4)
Ethics in Accounting
•
•
•
One of the primary goals of accounting is
to provide useful information for decision
making.
In order for the information to be useful, it
must be trusted.
Accountants must act in an ethical manner
in order for the information they produce to
be trusted.
19
© 2013 McGraw-Hill Ryerson Limited.
(LO4)
Ethical Obligations of
Accountants
•
•
•
•
Maintain a high level of professional
competence.
Treat sensitive information as confidential.
Exercise due care and professional
judgment.
Must not be associated with deceptive
information.
20
© 2013 McGraw-Hill Ryerson Limited.
(LO4)
Generally Accepted Accounting
Principles (GAAP)
•
•
•
GAAP are the underlying concepts that
make up acceptable accounting practices.
Canada has recently adopted International
Financial Reporting Standards (IFRS) for
publicly accountable enterprises (PAE).
There is also another set of standards
called Accounting Standards for Private
Enterprises (ASPE).
21
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
IFRS
•
•
IFRS was established to try to achieve
global agreement on the use of a common
set of accounting standards.
This is intended to make accounting
information more comparable from country
to country.
22
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
ASPE
•
•
Private enterprises are privately owned so
they have some different reporting needs
than public enterprises.
ASPE have significant parallels to IFRS
but there are some differences.
23
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
GAAP for Public vs. Private
Enterprises
GAAP to
be used
24
Publicly Accountable
Enterprises (PAEs)
Private
Enterprises (PEs)
IFRS
ASPE or IFRS
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Purpose of GAAP
•
•
•
The primary purpose of GAAP is to ensure
the usefulness of financial information.
In order for it to be useful, it must have the
characteristics of relevance and faithful
representation.
Usefulness is enhanced if the information
is comparable, verifiable, timely, and
understandable.
25
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
GAAP
GAAP includes the following principles:
• Business entity principle
• Cost principle
• Going concern principle
• Monetary unit principle
• Revenue recognition principle
26
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Business Entity Principle
•
Every business is to be accounted for
separately from its owner(s) or any other
economic entity of the owner.
27
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Cost Principle
•
•
All transactions are recorded based on the
actual cash amount received or paid.
In absence of cash, the cash equivalent
amount of the exchange is recorded.
28
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Going Concern Principle
•
Financial statement users can safely
assume that the statements reflect a
business that is going to continue its
operations instead of being closed or sold.
29
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Monetary Unit Principle
•
•
•
Requires that transactions be expressed
using units of money as the common
denominator.
It assumes that the monetary unit is
stable.
Adjustments are not made for changes in
currency value or inflation.
30
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Revenue Recognition Principle
•
•
Requires that revenue be recorded at the
time that it is earned regardless of whether
cash or another asset has been
exchanged.
The amount of revenue to be recorded is
measured by the cash plus the cash
equivalent of any other assets received.
31
© 2013 McGraw-Hill Ryerson Limited.
(LO5)
Financial Statements
•
•
Are an organization’s primary means of
financial communication.
An organization’s transactions are
recorded, classified, sorted, and
summarized in order to produce financial
statements.
32
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Financial Statements
There are four major financial statements:
• Income statement
• Balance sheet
• Statement of changes in equity
• The statement of cash flows
These statements provide different
information but are linked together.
33
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Financial Statements
Balance Sheet
(at the
beginning of
the period)
Income
Statement
Statement of
Changes in
Equity
Balance Sheet
(at the end of
the period)
Statement of
Cash Flows
Point in time
34
Period of time
© 2013 McGraw-Hill Ryerson Limited.
Point in time
(LO6)
Income Statement
The income statement reports:
•
•
•
Revenues of the organization.
Expenses (costs incurred in earning the
revenues).
Net income or loss.
The income statement covers a period of
time.
35
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Income Statement
Value of assets
exchanged for
products and
services
provided to
customers.
Vertically Inclined Rock Gym
Income S tatement
For Month Ended March 31, 2014
Revenues:
Teaching revenue
$3,800
Equipment rental revenue
300
Total revenues
Operating Expenses:
Rent expense
$1,000
S alaries expense
700
Total operating expenses
Net income
36
© 2013 McGraw-Hill Ryerson Limited.
$ 4,100
1,700
$ 2,400
(LO6)
Income Statement
Vertically Inclined Rock Gym
Income S tatement
For Month Ended March 31, 2014
Costs incurred
or the using up
of assets from
generating
revenue
Revenues:
Teaching revenue
$3,800
Equipment rental revenue
300
Total revenues
Operating Expenses:
Rent expense
$1,000
S alaries expense
700
Total operating expenses
Net income
37
© 2013 McGraw-Hill Ryerson Limited.
$ 4,100
1,700
$ 2,400
(LO6)
Statement of Owner’s Equity
Equity is equal to total assets minus
total liabilities.
It represents how much of the assets
belong to the owner.
Owner’s equity increases with owner
investments and net income.
Owner’s equity decreases with owner
withdrawals and net loss.
•
•
•
•
38
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Statement Of Owner’s Equity
Covers a
period
of time.
From the
Income
statement.
39
Vertically Inclined Rock Gym
S tatement of Owner's Equity
For Month Ended March 31, 2014
Virgil Klimb, capital, March 1
Add:
Investment by owner
Net income
Total
Less: Withdrawal by owner
Virgil Klimb, capital, March 31
© 2013 McGraw-Hill Ryerson Limited.
$
$10,000
2,400
-
12,400
$12,400
600
$11,800
(LO6)
Balance Sheet
The balance sheet reports the:
•
•
•
Assets
Liabilities
Owner’s equity
of an organization at a point in time.
It is linked to the Statement of Owner’s
Equity.
40
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Balance Sheet
Vertically Inclined Rock Gym
Balance Sheet
March 31, 2014
Properties or
economic
resources
owned by a
business
Assets
Cash
$ 8,400
Supplies
3,600
Equipment
6,000
Total assets $ 18,000
41
Liabilities
Accounts payable $ 200
Notes payable
6,000
Total liabilities
$ 6,200
Owner's Equity
Virgil Klimb,capital 11,800
Total liabilities
and owner's
equity
$ 18,000
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Balance Sheet
Vertically Inclined Rock Gym
Balance Sheet
March 31, 2014
Debts or
obligations
of the
business
Assets
Cash
$ 8,400
Supplies
3,600
Equipment
6,000
Total assets $ 18,000
42
Liabilities
Accounts payable $ 200
Notes payable
6,000
Total liabilities
$ 6,200
Owner's Equity
Virgil Klimb,capital 11,800
Total liabilities
and owner's
equity
$ 18,000
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Balance Sheet
Owner’s
claim on the
assets
From the
Statement of
Owner’s
Equity
Vertically Inclined Rock Gym
Balance Sheet
March 31, 2014
Assets
Cash
$ 8,400
Supplies
3,600
Equipment
6,000
Total assets $ 18,000
43
Liabilities
Accounts payable $ 200
Notes payable
6,000
Total liabilities
$ 6,200
Owner's Equity
Virgil Klimb,capital 11,800
Total liabilities
and owner's
equity
$ 18,000
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Cash Flow Statement
Reports the sources and uses of cash
for a period of time.
Organized by the company’s major
activities:
•
•
•
•
•
44
Operating
Investing
Financing
© 2013 McGraw-Hill Ryerson Limited.
(LO6)
Cash Flow Statement
Vertically Inclined Rock Gym
Cash Flow Statement
For Month Ended March 31, 2014
From
the
balance
sheet
45
Cash flows from operating activities:
Cash received from clients
Cash paid for supplies
Cash paid for rent
Cash paid to employee
Net cash used by operating acitivities
Cash flows from investing activities:
Cash flows from financing activities:
Investment by owner
Withdrawal by owner
Net cash provided by financing activities
Net increase in cash
Cash balance, January 1
Cash balance, January 31
© 2013 McGraw-Hill Ryerson Limited.
$4,100
(3,400)
(1,000)
(700)
($1,000)
0
$10,000
(600)
9,400
$8,400
$8,400
(LO6)
The Accounting Equation
Assets
=
Liabilities
+
Equity
Describe
what an
organization
has
invested in.
46
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
The Accounting Equation
Assets
Describe
what an
organization
has
invested in.
47
=
Liabilities
+
Equity
Describe
non-owner
financing
(borrowing)
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
The Accounting Equation
Assets
Describe
what an
organization
has
invested in.
48
=
Liabilities
Describe
non-owner
financing
(borrowing).
© 2013 McGraw-Hill Ryerson Limited.
+
Equity
Describe
owner
financing .
(LO7)
The Accounting Equation
Assets
=
Liabilities
+
Equity
The accounting equation is used to keep track
of changes in a company’s assets, liabilities,
and equity.
49
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
The Accounting Equation
Assets
=
Liabilities
+
Equity
Business transactions cause changes in assets,
liabilities, and equity.
50
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
Transaction Analysis
We need to determine:
1.
2.
51
Which accounts are being affected.
If the accounts are increasing or
decreasing.
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
Transaction Analysis
(1) Virgil Klimb invests $10,000 cash in the business.
Analysis:
Cash increases by $10,000.
Owner’s capital increases by $10,000.
Assets
=
(1)
Cash
Supplies Equipment
$10,000
New bal.
$10,000
$0
$10,000
52
$0
Liabilities
Accounts Notes
Payable Payable
$0
=
© 2013 McGraw-Hill Ryerson Limited.
$0
Owner's
+ Equity
V.Klimb
Capital
$10,000
$10,000
$10,000
(LO7)
Transaction Analysis
(2) Purchased supplies for $2,500 cash.
Analysis:
Supplies increase by $2,500.
Cash decreases by $2,500.
Assets
=
Cash
Supplies Equipment
$10,000
-$2,500
$2,500
$7,500
$2,500
$0
Old bal.
(2)
New bal.
$10,000
53
Liabilities
Accounts Notes
Payable Payable
$0
=
© 2013 McGraw-Hill Ryerson Limited.
$0
Owner's
+ Equity
V.Klimb
Capital
$10,000
$10,000
$10,000
(LO7)
Transaction Analysis
(3a) Purchased $1,100 of supplies on credit.
Analysis:
Supplies increase by $1,100.
Accounts Payable increases by $1,100
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$7,500
$2,500
$10,000
$1,100
$1,100
$7,500
$3,600
$0
$1,100
$0
$10,000
Old bal.
(3a)
New bal.
$11,100
54
=
© 2013 McGraw-Hill Ryerson Limited.
$11,100
(LO7)
Transaction Analysis
(3b)
Purchased $6,000 of equipment on credit.
A promissory note was signed.
Analysis:
Equipment increases by $6,000.
Notes payable increases by $6,000.
Old bal.
(3b)
New bal.
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$7,500
$2,500
$10,000
$1,100
$6,000
$1,100
$6,000
$7,500
$3,600
$6,000
$1,100
$6,000
$10,000
$17,100
55
=
© 2013 McGraw-Hill Ryerson Limited.
$17,100
(LO7)
Transaction Analysis
(4) Services rendered for $2,200 cash.
Analysis:
Cash increases $2,200
Owner’s equity increases $2,200
Old bal.
(4)
New bal.
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$7,500
$3,600
$6,000
$1,100
$6,000
$10,000
$2,200
$2,200
$9,700
$3,600
$6,000
$1,100
$6,000
$12,200
$19,300
56
=
© 2013 McGraw-Hill Ryerson Limited.
$19,300
(LO7)
Transaction Analysis
(5) Payment of $1,000 rent expense in cash.
Analysis:
Cash decreases $1,000
Owner’s equity decreases $1,000
Old bal.
(5)
New bal.
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$9,700
$3,600
$6,000
$1,100
$6,000
$12,200
-$1,000
-$1,000
$8,700
$3,600
$6,000
$1,100
$6,000
$11,200
$18,300
57
=
© 2013 McGraw-Hill Ryerson Limited.
$18,300
(LO7)
Transaction Analysis
(6) Payment of $700 salaries expense in cash.
Analysis:
Cash decreases $700
Owner’s equity decreases $700
Old bal.
(6)
New bal.
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$8,700
$3,600
$6,000
$1,100
$6,000
$11,200
-$700
-$700
$8,000
$3,600
$6,000
$1,100
$6,000
$10,500
$17,600
58
=
© 2013 McGraw-Hill Ryerson Limited.
$17,600
(LO7)
Transaction Analysis
(7) Service contract signed for April.
Analysis:
No economic exchange has taken place
All accounts remain unaffected
Owner's
Assets
=
Liabilities
+ Equity
Accounts Notes
V.Klimb,
Cash
Supplies Equipment
Payable Payable
Capital
$8,000
$3,600
$6,000
$1,100
$6,000
$10,500
Old bal.
(7)
New bal.
$8,000
$3,600
$17,600
59
$6,000
$1,100
=
© 2013 McGraw-Hill Ryerson Limited.
$6,000
$10,500
$17,600
(LO7)
Transaction Analysis
(8)Services and rental revenues of $1,900 rendered
for credit. ($1,600 Teaching Revenue and $300 Equipment
Rental Revenue)
Analysis: Accounts receivable increases $1,900
Owner’s equity increases $1,900
Asse ts
Ca sh
Old bal.
(8)
New bal.
A/ R
$8,000
S upplie s
Equipme nt
$3,600
$6,000
Lia bilitie s
Note s
A/ P
P a ya ble
$ 1, 10 0
$6,000
$ 1, 9 0 0
$ 8 , 0 0 0 $ 1, 9 0 0
$ 10 , 5 0 0
$ 1, 9 0 0
$3,600
$ 19 , 5 0 0
60
=
O wne r's
+ Equity
V . Klimb,
Ca pita l
$6,000
$ 1, 10 0
=
© 2013 McGraw-Hill Ryerson Limited.
$6,000
$ 12 , 4 0 0
$ 19 , 5 0 0
(LO7)
Transaction Analysis
(9) Receipt of $1,900 cash on account.
Analysis:
Cash increases $1,900
Accounts receivable decreases $1,900
Assets
Cash
A/ R
Old bal.
$ 8,000
$ 1,900
(9)
$ 1,900
-$ 1,900
New bal.
$ 9,900
$0
Supplies Equipment
Liabilities
Notes
A/ P
P ayable
$ 3,600
$ 6,000
$ 1,100
$ 6,000
$ 12,400
$ 3,600
$ 6,000
$ 1,100
$ 6,000
$ 12,400
$ 19,500
61
=
Owner's
+ Equity
V.Klimb,
Capital
=
© 2013 McGraw-Hill Ryerson Limited.
$ 19,500
(LO7)
Transaction Analysis
(10) Payment of $900 accounts payable.
Analysis:
Cash decreases $900
Accounts payable decreases $900
Assets
Cash
Old bal.
$ 9,900
A/ R
$0
=
Supplies Equipment
$ 3,600
$ 6,000
$ 1,100
(10) -$ 900
New bal.
$ 9,000
$ 6,000
$ 12,400
$ 6,000
$ 12,400
-$ 900
$0
$ 3,600
$ 18,600
62
Liabilities
Notes
A/ P
P ayable
Owner's
+ Equity
V.Klimb,
Capital
$ 6,000
$ 200
=
© 2013 McGraw-Hill Ryerson Limited.
$ 18,600
(LO7)
Transaction Analysis
(11) Withdrawal of $600 cash by owner.
Analysis:
Cash decreases $600
Owner’s capital decreases $600
Assets
Cash
Old bal.
$ 9,000
A/ R
$0
=
Supplies Equipment
$ 3,600
$ 6,000
Liabilities
Notes
A/ P P ayable
$ 200
$ 6,000
(11) -$ 600
New bal.
$ 8,400
$ 12,400
-$ 600
$0
$ 3,600
$ 18,000
63
Owner's
+ Equity
V.Klimb,
Capital
$ 6,000
$ 200
=
© 2013 McGraw-Hill Ryerson Limited.
$ 6,000
$ 11,800
$ 18,000
(LO7)
Financial Statement Preparation
The final balances of the accounts after all
of the transactions have been recorded are
as follows:
A ssets
C ash
Fin a l b a l.
$ 8 ,4 0 0
A/R
$0
=
S upplie s
E quipm e nt
$ 3 ,6 0 0
$ 6 ,0 0 0
$ 18 ,0 0 0
Lia bilit ie s
N o tes
A/P
P a ya ble
$ 200
=
$ 6 ,0 0 0
O wne r' s
E quit y
+
V .Klim b,
C a pit a l
$ 11,8 0 0
$ 18 ,0 0 0
This information will be used to prepare the
financial statements.
64
© 2013 McGraw-Hill Ryerson Limited.
(LO7)
Financial Statement Preparation
The Income Statement is prepared
first by using revenue and expense
information from the Equity
column.
Ve rti cal l y Incl i ne d Rock Gym
Income State me nt
For Month Ende d March 31, 2014
Re ve nue s:
Transactions 4 and 8
Transaction 8
Te achi ng re ve nue
Equi pme nt re ntal re ve nue
$ 3,800
300
Total re ve nue s
$ 4,100
O pe rati ng Expe nse s:
Transaction 5
Transaction 6
Re nt e xpe nse
Sal ari e s e xpe nse
Total ope rati ng e xpe nse s
Ne t i ncome
65
© 2013 McGraw-Hill Ryerson Limited.
$ 1,000
700
1,700
$ 2,400
(LO8)
The Statement
of Owner’s
Equity is
prepared next
Ve rti cal l y Incl i ne d Rock Gym
Income State me nt
For Month Ende d March 31, 2014
Re ve nue s:
Te achi ng re ve nue
Equi pme nt re ntal re ve nue
$ 3,800
300
Total re ve nue s
$ 4,100
O pe rati ng Expe nse s:
Re nt e xpe nse
Sal ari e s e xpe nse
$ 1,000
700
Total ope rati ng e xpe nse s
1,700
Ne t i ncome
$ 2,400
Vertically Inclined Rock Gym
S tatement of Owner's Equity
For Month Ended March 31, 2014
Transaction 1
Income Statement
Transaction 11
Virgil Klimb, capital, March 1
Add:
Investment by owner
Net income
Total
Less: Withdrawal by owner
Virgil Klimb, capital, March 31
66
© 2013 McGraw-Hill Ryerson Limited.
$
$10,000
2,400
-
12,400
$12,400
600
$11,800
(LO8)
The Balance Sheet is prepared
using the final balances of the
accounts
Ve rtically Incline d Rock Gym
Balance She e t
March 31, 2014
Asse ts
Cash
$
Supplie s
Equipme nt
8,400
3,600
6,000
From the Statement
of Owner’s Equity
Total asse ts $ 18,000
67
Liabilitie s
Accounts payable
$
200
Note s payable
6,000
Total liabilitie s
$ 6,200
Owne r's Equity
Virgil Klimb,capital
11,800
Total liabilitie s
and owne r's
e quity
$ 18,000
© 2013 McGraw-Hill Ryerson Limited.
(LO8)
End of Chapter
68
© 2013 McGraw-Hill Ryerson Limited.