After the trial balance is prepared, the business owner can prepare the financial statements. List and...

After the trial balance is prepared, the business owner can prepare the financial statements. List and discuss the purpose of each financial statement, the order in which the financial statements are prepared, and the information included in each financial statement (information in the back of Chapter 3).

In addition, consider the fact that many people feel that financial statemets should be expanded beyond the traditional components (income statement, statement of owner's equity, statement of cash flows and balance sheet). Should finanical statements be expanded to include a company's ecological and social performance?

Expert Solution

The following 4 statements are the basic financial statements prepared after trial balance is completed

1. Income Statement -

Income statement presents information on financial results over a perod of time.
It communicates revenue and other income generated and expenses incurred during the period.
Net Income = Revenue + Other Income - Expenses
Basic & Diluted EPS is presented on the face of the Income statement.

2. Balance sheet

It is also called statement of Financial Position
It presents company's current financial position by disclosing resources (assets) and obligations (liabilities)
Owner's Equity = Assets - Liabilities
Balance sheet is presented as on date.

3. Statement of Changes in Equity

This statement reports changes in owner's investment
Basic Components include Equity Share Capital or Paid up Share Capital, Retained Earnings and Non controlling minority interests & reserves.
It shows the beginning balance, any increase or decrease during the period and closing balance.

4. Cash Flow Statement

Cash Flow statement shows the financial flexibility of the company
Cashflow is divided in 3 categories a. Operating b. Investing and c. Financing
Operating activities include day to operational activties.
Investing activites are associated with acquistion and disposl on assets
Financing Activities are associated with activities related to obtaining or repaying capital used for the business
There are 2 methods - Direct and Indirect Method of preparing cashflows

In addition to above, Financial statements include Notes to Accounts and Supplementary schedules

They are also known as foot notes
They provide information essential for understanding the data in the primary statements
They provide basis for preparation of financial statements, accounting policies, methods & estimates used.
It allows users to improve their assessment of the amount, timing & uncertainity of the estimates reported.
Provides additional information like business acquistions or disposals, legal actions, employee benefit plans, contingenicies & commitments, significan customers, sales to related parties and segments of the firm.

In today's changing world, it is necessary that the financial statements should just not provide finanacial data. The companies should disclose its ecological and social performance. This is necessary not onlly to keep the companies ecologiclly and socially responsible it also gives a non-financial view of the company to the readers of financial statements. There are certain non monetary factors necessary to determine whether the company is doing good work ecologically and socially. These reports ensure that the company is not exploiting ecological and social factors to maximise financial gains. Hence reporting of ecological and social performance of the company is also essential.

ekkarill92 answered 2 years ago

After the trial balance is prepared, the business owner can prepare the financial statements.

After the trial balance is prepared, the business owner can prepare the financial statements. List and discuss the purpose of each financial statement, the order in which the financial statements are prepared, and the information included in each financial statement information also in Chapter 1, illustration 1.9). In addition, consider the fact that many people feel that financial statements should be expanded beyond the traditional components (income statement, statement of owner's equity, statement of cash flows and balance sheet). Should financial...

An inexperienced bookkeeper prepared the following trial balance that does not balance. Prepare a correct trial...

An inexperienced bookkeeper prepared the following trial balance that does not balance. Prepare a correct trial balance, assuming all account balances are normal. ORIOLE COMPANY Trial Balance December 31, 2017 Debit Credit Cash $22,410 Prepaid Insurance $ 4,700 Accounts Payable 4,110 Unearned Service Revenue 4,790 Common Stock 10,000 Retained Earnings 6,600 Dividends 7,140 Service Revenue 26,800 Salaries and Wages Expense 12,460 Rent Expense 5,590 $39,660 $64,940

Prepare a trial balance and financial statements. The accounts in the ledger of Bastin Delivery Service...

Prepare a trial balance and financial statements. The accounts in the ledger of Bastin Delivery Service contain the following balances on July 31, 2017. Accounts Receivable $13,400 Accounts Payable 8,400 Cash ? Equipment 80,000 Maintenance and Repairs Expense 1,958 Insurance Expense 900 Accumulated Depreciation 20,640 Notes Payable (due 2020) 28,450 Prepaid Insurance 2,200 Service Revenue 15,500 Dividends 700 Common Stock 40,000 Salaries and Wages Expense 7,428 Salaries and Wages Payable 820 Retained Earnings (July 1, 2017) 5,200 Instructions: 1. Prepare...

Why do businesses have to prepare financial statements? What is the purpose of a trial balance...

Why do businesses have to prepare financial statements? What is the purpose of a trial balance and an income statement?

Trial Balance and Financial Statements The following account balances were prepared (out of order) from the...

Trial Balance and Financial Statements The following account balances were prepared (out of order) from the general ledger of The Cat Whisperer, Inc. of January 31. The company trains cats having behavioral problems. The firm's accounting year began on January 1. All accounts have normal balances. Facilities $32,000 Office Rent Expense $800 Maintenance Expense 460 Supplies Expense 1,760 Supplies 1,640 Utilities Expense 200 Advertising Expense 550 Fees Earned 20,470 Common Stock 37,600 Accounts Receivable 8,200 Cash 7,300 Salaries Expense 4,480...

BE2-lO An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance, assuming all...

BE2-lO An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance, assuming all account balances are normal. WALTER COMPANY Trial Balance December 31, 2012 Debit $10,800 Credit Prepaid Insurance $ 3,500 Accounts Payable 3,000 Uhearned Service Revenue 2,200 Owner's Capital 9,000 Owner's Drawings 4,500 Service Revenue 25,600 Salaries and Wages Expense 18,600 Rent Expense 2,400 $31,600 $48,000 P2-2A Desiree Clark is a licensed CPA. During the month 01 operations of her business, the following events and transactions...

Prepare an adjusted trial balance. If an amount Ledger Accounts, Adjusting Entries, Financial Statements, and Closing...

Prepare an adjusted trial balance. If an amount Ledger Accounts, Adjusting Entries, Financial Statements, and Closing Entries; Optional Spreadsheet. The unadjusted trial balance of Recessive Interiors at January 31, 2019, the end of the year, follows: Recessive Interiors Unadjusted Trial Balance January 31, 2019 Debit Balances Credit Balances 11 Cash 13,100 13 Supplies 8,000 14 Prepaid Insurance 7,500 16 Equipment 113,000 17 Accumulated Depreciation—Equipment 12,000 18 Trucks 90,000 19 Accumulated Depreciation—Trucks 27,100 21 Accounts Payable 4,500 31 Jeanne McQuay, Capital...

1. Preparation of financial statements Using the Adjusted Trial Balance shown below, prepare the company’s: (a) ...

1. Preparation of financial statements Using the Adjusted Trial Balance shown below, prepare the company’s: (a) Income Statement (b) Statement of Retained Earnings (c) Balance Sheet by completing the tables provided on the following pages. All Star Repair Shop Adjusted Trial Balance Dec. 31, 2016 Debit Credit Cash $ 25,000 Supplies 2,000 Accounts Receivable 70,000 Equipment 30,000 Accumulated Depreciation on Equipment $ 10,000 Accounts Payable 20,000 Notes Payable 5,000 Income Taxes Payable 20,000 Capital Stock 30,000 Retained Earnings (as of...

Prepare the financial statements below using data in the attached adjusted trial balance. North Star Inc....

Prepare the financial statements below using data in the attached adjusted trial balance. North Star Inc. Adjusted Trial Balance 31-Dec-18 Debit Credit Cash 185,000 Accounts Receivable 14,250 Allowance for Doubtful Accounts 950 Inventory as of 12/31/18 48,000 Supplies 2,400 Equipment 275,000 Accumulated Depreciation - Equipment 180,000 Building 355,000 Accumulated Depreciation - Building 195,000 Land 275,000 Accounts Payable 29,500 Salaries and Wages Payable 4,500 Mortgage Payable 125,000 Common...

The adjusted trial balance is prepared

The adjusted trial balance is prepared a. to determine whether the balance sheet is in balance. b. to verify the equality of total debit and credit balances. c. to determine the net income or loss. d. for all of these reasons.

Question