The Balance Sheet
A balance sheet lists the assets, liabilities, and owner’s equity of a business as of a point in time. It is essentially a picture of the overall worth of the business. It uses the following formulas.
Assets = Liabilities + Owners Equity (Balance Sheet)
Assets
Current
Cash
Accounts Receivable
Employee Loans
Inventory
Prepaid Expenses
Mill Credits Due
Fixed
Equipment
Automobiles
Furniture & Fixtures
Leasehold Improvements
Contra Fixed Asset Account
Accumulated Depreciation
Liabilities
Current
Accounts Payable
Current portion of Notes Payable
Payroll Payables
401K Payable
Sales Tab Payable
Customer Deposits
Accrued Expenses
Long Term Liabilities
Notes Payable (over 1 year)
Stockholder’s Equity
Common Stock
Retained Earnings
Distributions
The Profit & Loss Statement
The profit and loss statement or income statement is a summary of the revenues and expenses along with the net profit or loss of a business for a specific period of time. The net profit or loss is carried over to the equity section of the balance sheet. A profit and loss statement uses the following formulas:
Revenues - Cost of Sales- Expenses + Other Income = Current Income/Loss (Income Statement)
(These are all dumped into retained earnings on the balance sheet through the year end close process.)
Income statement is for a period of time.
Revenues
Sales
Sales Discounts (Contra Account)
Customer Refunds (Contra Account)
Sales Tax Expense (Contra Account)
Cost of Sales
Cost of Materials
Freight
Subcontract Labor
Sample Cost
Commissions
Other Cost of Sales
Operating Expense
Salaries
Advertising
Bank Charges
Credit Card Fees
Donations
Dues and Subscriptions
Insurance
Interest Expense
Legal and Accounting
Office Supplies
Payroll Taxes
Rent
Repairs and Maintenance
Warehouse Supplies
Telephone
Utilities Other Income
Earned Discounts
Interest Income
Finance Charges
Other Income Assets- Normal Debit Balance
Liabilities – Normal Credit Balance
Owner’s Equity - Normal Credit Balance
Revenues- Normal Credit Balance
Cost of Sales - Normal Debit Balance
Expenses - Normal Debit Balance
Other Income - Normal Credit Balance
When making a journal entry, in order to increase an account, do the same as its normal balance; in order to decrease an account do the opposite of its normal balance. To increase an asset account, debit it. To decrease an asset account, credit it.
The Trial Balance
The trial balance is a summary listing of the balances of accounts within the general ledger. Also listed are the debit and credit activity for the period for each account. Normally, a trial balance is used for reconciliation
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