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Accounting for business decision solutions

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Solution Undercover Roofing Q2 Adjustment Entries and Financial Statements .
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Accounting for business decision solutions

  1. 1. Chapter 4-1 Completing the Accou Financial Accounting http://www.brightscholarships.com/ ChapterChapter 44ChapterChapter 44
  2. 2. Chapter 4-2 1. Prepare a worksheet. 2. Explain the process of closing the books. 3. Describe the content and purpose of a post-closing trial balance. 4. State the required steps in the accounting cycle. 5. Explain the approaches to preparing correcting entries. 6. Identify the sections of a classified balance sheet. Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
  3. 3. Chapter 4-3 Using aUsing a WorksheetWorksheet Using aUsing a WorksheetWorksheet Steps inSteps in preparationpreparation PreparingPreparing financialfinancial statementsstatements PreparingPreparing adjusting entriesadjusting entries Closing theClosing the BooksBooks Closing theClosing the BooksBooks Summary ofSummary of AccountingAccounting CycleCycle Summary ofSummary of AccountingAccounting CycleCycle ClassifiedClassified Balance SheetBalance Sheet ClassifiedClassified Balance SheetBalance Sheet Current assetsCurrent assets Long-termLong-term investmentsinvestments Property, plant,Property, plant, and equipmentand equipment Intangible assetsIntangible assets Current liabilitiesCurrent liabilities Long-termLong-term liabilitiesliabilities Stockholders’Stockholders’ equityequity ReversingReversing entries—Anentries—An optional stepoptional step CorrectingCorrecting entries—Anentries—An avoidable stepavoidable step Completing the Accounting CycleCompleting the Accounting CycleCompleting the Accounting CycleCompleting the Accounting Cycle PreparingPreparing closing entriesclosing entries Posting closingPosting closing entriesentries Preparing aPreparing a post-closing trialpost-closing trial balancebalance
  4. 4. Chapter 4-4 A multiple-column form used in preparing financial statements. Not a permanent accounting record. Five step process. Use of worksheet is optional. Using A WorksheetUsing A WorksheetUsing A WorksheetUsing A Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. WorksheetWorksheet
  5. 5. Chapter 4-5 Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. Illustration 4-1
  6. 6. Chapter 4-6 Illustration The trial balance for Undercover Roofing for the month ended March 31, 2008, is as follows. Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet Account Titles Dr. Cr. Cash 2,500$ Accounts Receivable 1,800 Roofing Supplies 1,100 Equipment 6,000 Accumulated Depreciation 1,200$ Accounts Payable 1,400 Unearned Revenue 300 Common stock 1,000 Retained earnings 6,000 Dividends 600 Service Revenue 3,000 Salaries Expense 700 Miscellaneous Expense 200 Totals 12,900$ 12,900$ Trial Balance Other data: 1. Supplies on hand total $140. 2. Depreciation for March is $200. 3. Unearned revenue amounted to $130 on March 31. 4. Accrued salaries are $350. Instructions a. Prepare and complete the worksheet. SO 1 Prepare a worksheet.SO 1 Prepare a worksheet.
  7. 7. Chapter 4-7 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 Accounts Receivable 1,800 Roofing Supplies 1,100 Equipment 6,000 Accumulated Depreciation 1,200 Accounts Payable 1,400 Unearned Revenue 300 Common stock 1,000 Retained earnings 6,000 Dividends 600 Service Revenue 3,000 Salaries Expense 700 Miscellaneous Expense 200 Totals 12,900 12,900 Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. Trial balance amounts come directly from ledger accounts. Include all accounts with balances. 1. Prepare a Trial Balance on the Worksheet1. Prepare a Trial Balance on the Worksheet
  8. 8. Chapter 4-8 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 Accounts Receivable 1,800 Roofing Supplies 1,100 960 Equipment 6,000 Accumulated Depreciation 1,200 200 Accounts Payable 1,400 Unearned Revenue 300 170 Common stock 1,000 Retained earnings 6,000 Dividends 600 Service Revenue 3,000 170 Salaries Expense 700 350 Miscellaneous Expense 200 Totals 12,900 12,900 Supplies Expense 960 Depreciation Expense 200 Salaries Payable 350 Totals 1,680 1,680 Net Income Totals Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. (a) (a) (b) (b) (d) (d) (c) (c) Enter adjustment amounts, total adjustments columns, and check for equality. Add additional accounts as needed. Adjustments Key: (a) Supplies used. (b) Depreciation expense. (c) Service revenue earned. (d) Salaries accrued. 2. Enter the Adjustments in the Adjustments Columns2. Enter the Adjustments in the Adjustments Columns
  9. 9. Chapter 4-9 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 2,500 Accounts Receivable 1,800 1,800 Roofing Supplies 1,100 960 140 Equipment 6,000 6,000 Accumulated Depreciation 1,200 200 1,400 Accounts Payable 1,400 1,400 Unearned Revenue 300 170 130 Common stock 1,000 1,000 Retained earnings 6,000 6,000 Dividends 600 600 Service Revenue 3,000 170 3,170 Salaries Expense 700 350 1,050 Miscellaneous Expense 200 200 Totals 12,900 12,900 Supplies Expense 960 960 Depreciation Expense 200 200 Salaries Payable 350 350 Totals 1,680 1,680 13,450 13,450 Net Income Totals Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. (a) (a) (b) (b) (d) (d) (c) (c) Total the adjusted trial balance columns and check for equality. 3. Complete the Adjusted Trial Balance Columns3. Complete the Adjusted Trial Balance Columns
  10. 10. Chapter 4-10 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 2,500 Accounts Receivable 1,800 1,800 Roofing Supplies 1,100 960 140 Equipment 6,000 6,000 Accumulated Depreciation 1,200 200 1,400 Accounts Payable 1,400 1,400 Unearned Revenue 300 170 130 Common stock 1,000 1,000 Retained earnings 6,000 6,000 Dividends 600 600 Service Revenue 3,000 170 3,170 3,170 Salaries Expense 700 350 1,050 1,050 Miscellaneous Expense 200 200 200 Totals 12,900 12,900 Supplies Expense 960 960 960 Depreciation Expense 200 200 200 Salaries Payable 350 350 Totals 1,680 1,680 13,450 13,450 2,410 3,170 Net Income Totals Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. (a) (a) (b) (b) (d) (d) (c) (c) Extend all revenue and expense account balances to the income statement columns. 4. Extend Amounts to Financial Statement Columns4. Extend Amounts to Financial Statement Columns
  11. 11. Chapter 4-11 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 2,500 2,500 Accounts Receivable 1,800 1,800 1,800 Roofing Supplies 1,100 960 140 140 Equipment 6,000 6,000 6,000 Accumulated Depreciation 1,200 200 1,400 1,400 Accounts Payable 1,400 1,400 1,400 Unearned Revenue 300 170 130 130 Common stock 1,000 1,000 1,000 Retained earnings 6,000 6,000 6,000 Dividends 600 600 600 Service Revenue 3,000 170 3,170 3,170 Salaries Expense 700 350 1,050 1,050 Miscellaneous Expense 200 200 200 Totals 12,900 12,900 Supplies Expense 960 960 960 Depreciation Expense 200 200 200 Salaries Payable 350 350 350 Totals 1,680 1,680 13,450 13,450 2,410 3,170 11,040 10,280 Net Income Totals Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. (a) (a) (b) (b) (d) (d) (c) (c) Extend all asset, liability, and equity account balances to the balance sheet columns. 4. Extend Amounts to Financial Statement Columns4. Extend Amounts to Financial Statement Columns
  12. 12. Chapter 4-12 Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,500 2,500 2,500 Accounts Receivable 1,800 1,800 1,800 Roofing Supplies 1,100 960 140 140 Equipment 6,000 6,000 6,000 Accumulated Depreciation 1,200 200 1,400 1,400 Accounts Payable 1,400 1,400 1,400 Unearned Revenue 300 170 130 130 Common stock 1,000 1,000 1,000 Retained earnings 6,000 6,000 6,000 Dividends 600 600 600 Service Revenue 3,000 170 3,170 3,170 Salaries Expense 700 350 1,050 1,050 Miscellaneous Expense 200 200 200 Totals 12,900 12,900 Supplies Expense 960 960 960 Depreciation Expense 200 200 200 Salaries Payable 350 350 350 Totals 1,680 1,680 13,450 13,450 2,410 3,170 11,040 10,280 Net Income 760 760 Totals 3,170 3,170 11,040 11,040 Balance Sheet Adjusted Income Trial Balance Adjustments Trial Balance Statement Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. 5. Total Columns, Compute Net Income (Loss)5. Total Columns, Compute Net Income (Loss) Compute Net income or Net loss. (a) (a) (b) (b) (d) (d) (c) (c)
  13. 13. Chapter 4-13 Net income is shown on a work sheet in the: a. income statement debit column only. b. balance sheet debit column only. c. income statement credit column and balance sheet debit column. d. income statement debit column and balance sheet credit column. Review QuestionReview Question Steps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a WorksheetSteps in Preparing a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet.
  14. 14. Chapter 4-14 Income statement is prepared from the income statement columns. Balance sheet and retained earnings statement are prepared from the balance sheet columns. Preparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. WorksheetWorksheet
  15. 15. Chapter 4-15 Preparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. Revenues 3,170$ Service revenues Expenses Salaries expense 1,050$ Supplies expense 960 Depreciation expense 200 Miscellaneous expense 200 Total expenses 2,410 Net income 760$ Undercover Roofing Income Statement For the Month Ended March 31, 2008 b. Prepare an income statement for the month ended March 31, 2008.
  16. 16. Chapter 4-16 Preparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. b. Prepare a statement of retained earnings for the month ended March 31, 2008. Retained earnings, beginning 6,000$ Add: Net income 760 Less: Dividends (600) Retained earnings, ending 6,160$ Undercover Roofing Retained Earnings Statement For the Month Ended March 31, 2008
  17. 17. Chapter 4-17 Preparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. b. Prepare a balance sheet as of March 31, 2008. Current assets Cash 2,500$ Accounts receivable 1,800 Roofing supplies 140 Total current assets 4,440 Property, plant, and equipment Equipment 6,000 Less: Accumulated depreciation 1,400 4,600 Total assets 9,040$ Current liabilities Accounts payable 1,400$ Salaries payable 350 Unearned revenue 130 Total current liabilities 1,880 Stockholders' equity Common stock 1,000 Retained earnings 6,160 Total liabilities and stockholder's equity 9,040$ Liabilities and Stockholders' Equity Assets Undercover Roofing Balance Sheet March 31, 2008
  18. 18. Chapter 4-18 The adjusting entries are prepared from the adjustments columns of the worksheet. Journalizing and posting of adjusting entries follows the preparation of financial statements when a worksheet is used. Preparing Adjusting Entries from a WorksheetPreparing Adjusting Entries from a WorksheetPreparing Adjusting Entries from a WorksheetPreparing Adjusting Entries from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. Adjusting EntriesAdjusting Entries
  19. 19. Chapter 4-19 Preparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a WorksheetPreparing Financial Statements from a Worksheet SO 1 Prepare a worksheet.SO 1 Prepare a worksheet. c. Journalize the adjusting entries from the adjustments columns of the worksheet. Account Title Ref. Debit Credit Mar. 31 Supplies expense 960 Roofing supplies 960 Depreciation expense 200 Accumulated depreciation 200 Unearned revenue 170 Service revenue 170 Salaries expense 350 Salaries payable 350 Date
  20. 20. Chapter 4-20 At the end of the accounting period, the company makes the accounts ready for the next period. Closing the BooksClosing the BooksClosing the BooksClosing the Books SO 2 Explain the process of closing the books.SO 2 Explain the process of closing the books. Illustration 4-5
  21. 21. Chapter 4-21 Closing entriesClosing entries formally recognize, in the general ledger, the transfer of net income (or net loss) and dividends to retained earnings at the end of the accounting period. Closing the BooksClosing the BooksClosing the BooksClosing the Books SO 2 Explain the process of closing the books.SO 2 Explain the process of closing the books.
  22. 22. Chapter 4-22 Closing the BooksClosing the BooksClosing the BooksClosing the Books SO 2 Explain the process of closing the books.SO 2 Explain the process of closing the books. Illustration 4-6 Retained Earnings is a permanent account; all other accounts are temporary accounts. Dividends are closed directly to Retained Earnings and not to Income Summary because Dividends are not an expense. Note:
  23. 23. Chapter 4-23 Service revenue 3,170 Income summary 3,170 Income summary 2,410 Salary expense 1,050 Supplies expense 960 Depreciation expense 200 Income summary 760 Retained earnings 760 Retained earnings 600 Dividends 600 Miscellaneous expense 200 d. Journalize the closing entries from the financial statement columns of the worksheet. Closing the BooksClosing the BooksClosing the BooksClosing the Books SO 2 Explain the process of closing the books.SO 2 Explain the process of closing the books. Closing Entries need to be Posted
  24. 24. Chapter 4-24 Purpose is to prove the equality of the permanent account balances after journalizing and posting of closing entries. Preparing a Post-Closing Trial BalancePreparing a Post-Closing Trial BalancePreparing a Post-Closing Trial BalancePreparing a Post-Closing Trial Balance SO 3 Describe the content and purpose of a post-closing trial balance.SO 3 Describe the content and purpose of a post-closing trial balance. Account Titles Dr. Cr. Cash 2,500$ Accounts Receivable 1,800 Roofing Supplies 140 Equipment 6,000 Accumulated Depreciation 1,400$ Accounts Payable 1,400 Salaries payable 350 Unearned Revenue 130 Common Stock 1,000 Retained Earnings 6,160 Totals 10,440$ 10,440$ Trial Balance Post-Closing All temporary accounts will have zero balances.
  25. 25. Chapter 4-25 Summary of the Accounting CycleSummary of the Accounting CycleSummary of the Accounting CycleSummary of the Accounting Cycle 1. Analyze business transactions1. Analyze business transactions 2. Journalize the transactions 2. Journalize the transactions 6. Prepare an adjusted trial balance 6. Prepare an adjusted trial balance 7. Prepare financial statements 7. Prepare financial statements 8. Journalize and post closing entries 8. Journalize and post closing entries 9. Prepare a post-closing trial balance 9. Prepare a post-closing trial balance 4. Prepare a trial balance4. Prepare a trial balance 3. Post to ledger accounts3. Post to ledger accounts 5. Journalize and post adjusting entries 5. Journalize and post adjusting entries Illustration 4-12 SO 4 State the required steps in the accounting cycle.SO 4 State the required steps in the accounting cycle.
  26. 26. Chapter 4-26 Correcting entriesCorrecting entries are unnecessary if the records are error-free. are made whenever an error is discovered. must be posted before closing entries. Instead of preparing a correcting entry, it is possible to reverse the incorrect entry and then prepare the correct entry. Correcting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable Step SO 5 Explain the approaches to preparing correcting entries.SO 5 Explain the approaches to preparing correcting entries.
  27. 27. Chapter 4-27 BE4-9BE4-9 At Batavia Company, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer was recorded as a debit to Cash and a credit to Service Revenue for $780. Correcting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable Step SO 5 Explain the approaches to preparing correcting entries.SO 5 Explain the approaches to preparing correcting entries. Cash 780Incorrect entry Service revenue 780 Cash 780Correct entry Accounts receivable 780 Service revenue 780CorrectingCorrecting entryentry Accounts receivable 780
  28. 28. Chapter 4-28 BE4-9BE4-9 At Batavia Company, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 2. The purchase of supplies on account for $1,570 was recorded as a debit to Supplies and a credit to Accounts Payable $1,750. Correcting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable StepCorrecting Entries—An Avoidable Step SO 5 Explain the approaches to preparing correcting entries.SO 5 Explain the approaches to preparing correcting entries. Supplies 1,750Incorrect entry Accounts payable 1,750 Supplies 1,570Correct entry Accounts payable 1,570 Accounts payable 180CorrectingCorrecting entryentry Supplies 180
  29. 29. Chapter 4-29 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Presents a snapshot at a point in time. To improve understanding, companies group similar assets and similar liabilities together. Assets Liabilities and Owner’s Equity Current assets Current liabilities Long-term investments Long-term liabilities Property, plant, and equipment Stockholders’ equity Intangible assets Illustration 4-17 Standard ClassificationsStandard Classifications
  30. 30. Chapter 4-30 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Operating cycle is the average time it takes from the purchase of inventory to the collection of cash from customers. Current AssetsCurrent Assets
  31. 31. Chapter 4-31 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Companies usually list current asset accounts in the order they expect to convert them into cash. Illustration 4-19 Current AssetsCurrent Assets
  32. 32. Chapter 4-32 Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called: a. Current assets. b. Intangible assets. c. Long-term investments. d. Property, plant, and equipment. Review QuestionReview Question The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet.
  33. 33. Chapter 4-33 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Investments in stocks and bonds of other companies. Investments in long-term assets such as land or buildings that a company is not currently using in its operating activities. Long-Term InvestmentsLong-Term Investments Illustration 4-20
  34. 34. Chapter 4-34 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Long useful lives. Currently used in operations. Depreciation - allocating the cost of assets to a number of years. Accumulated depreciation - total amount of depreciation expensed thus far in the asset’s life. Property, Plant, and EquipmentProperty, Plant, and Equipment
  35. 35. Chapter 4-35 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Illustration 4-21 Property, Plant, and EquipmentProperty, Plant, and Equipment
  36. 36. Chapter 4-36 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Assets that do not have physical substance. Intangible AssetsIntangible Assets Illustration 4-22
  37. 37. Chapter 4-37 Patents and copyrights are a. Current assets. b. Intangible assets. c. Long-term investments. d. Property, plant, and equipment. Review QuestionReview Question The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet.
  38. 38. Chapter 4-38 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Obligations the company is to pay within the coming year. Usually list notes payable first, followed by accounts payable. Other items follow in order of magnitude. Liquidity - ability to pay obligations expected to be due within the next year. Current LiabilitiesCurrent Liabilities
  39. 39. Chapter 4-39 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Illustration 4-23 Current LiabilitiesCurrent Liabilities
  40. 40. Chapter 4-40 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Obligations a company expects to pay after one year. Long-Term LiabilitiesLong-Term Liabilities Illustration 4-24
  41. 41. Chapter 4-41 Which of the following is not a long-term liability? a. Bonds payable b. Current maturities of long-term obligations c. Long-term notes payable d. Mortgages payable Review QuestionReview Question The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet.
  42. 42. Chapter 4-42 The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet SO 6 Identify the sections of a classified balance sheet.SO 6 Identify the sections of a classified balance sheet. Proprietorship - one capital account. Partnership - capital account for each partner. Corporation - Capital Stock and Retained Earnings. Stockholders’ (Owners’) EquityStockholders’ (Owners’) Equity Illustration 4-25
  43. 43. Chapter 4-43 What are your personal assets? What are your personal liabilities? Some Facts: 48% of Americans think they know how much wealth they have. 2005 was the first year since the Depression when Americans spent more money than they made. All About YouAll About YouAll About YouAll About You Your Personal Balance SheetYour Personal Balance Sheet Net Worth=
  44. 44. Chapter 4-44 Some Facts: The total net worth of U.S. households hit a record $51.09 trillion during 2005. Economists note that a rise in house prices actually results in a fall in individual savings. When asked about very important wealth-building strategies for all Americans, 16% said “win the lottery.” All About YouAll About YouAll About YouAll About You Your Personal Balance SheetYour Personal Balance Sheet
  45. 45. Chapter 4-45 In a recent study, individuals were asked whether they could save 20% of their household income. All About YouAll About YouAll About YouAll About You Inconsistent thinking? Should you prepare a personal balance sheet?
  46. 46. Chapter 4-46 What Do You Think?What Do You Think? Should you prepare a personal balance sheet? All About YouAll About YouAll About YouAll About You YES: In order to attain your desired financial objectives, you need to set goals early. NO: Your financial situation right now bears very little resemblance to what it will look like after you graduate. At that point, you will have a better job, and you won’t have to pay tuition. Right now, you’re just “bleeding cash.”
  47. 47. Chapter 4-47 “Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.” CopyrightCopyrightCopyrightCopyright

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