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Chapter 20.2 Preparing Financial Statements

This chapter outlines essential financial statements that every business must prepare, including the Income Statement, Balance Sheet, and Cash Flow Statement. It details the information found in each report, the significance of ongoing accounting activities, and how technology enhances efficiency in handling accounting functions. Understanding these statements is crucial for assessing a business’s financial health and ensuring effective management practices. Explore activities such as ledger postings, payroll records maintenance, and monthly financial preparation for a comprehensive view of business finance management.

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Chapter 20.2 Preparing Financial Statements

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  1. Chapter 20.2 Preparing Financial Statements Business Management Mrs. Deady

  2. Objectives • Describe the items of information included on each financial statement • Identify ongoing accounting activities • Explain how technology helps business owners with all the accounting functions

  3. Definitions 20.2 • Income Statement – report of the revenue, expenses, and net income or loss for the accounting period. • Balance Sheet – report of the final balances of all asset, liability, and owner’s equity accounts at the end of an accounting period. • Cash flow – amount of cash that is available at any given time • Statement of Cash Flows – shows how much cash your business took in and where the cash went

  4. Calculating Net Income or Loss Revenue - Expenses Net Revenue or (Net Loss)

  5. Income Statement Bug Runner Delivery Service Income Statement Year Ended December 31, 2007

  6. Balance Sheet Balance Sheet December 31, 2007

  7. Main Purpose of a Balance Sheet • To present your business’s financial position on a specific date. • It reports what a business owns, owes and is worth.

  8. Cash Flow Statement Cash Flow Statement March 31, 2007

  9. Weekly Accounting Activities • Posting to the General Ledger • Keeping Track of when Payments are Due • Keeping Payroll Records • Keeping Tax Records • Filing all records and documents

  10. Monthly Accounting Activities • Preparing Financial Statements • Paying Payroll Tax Deposits (local, state, federal) • Reconciling the Bank Statement to Checkbook • Balancing the Checkbook • Balancing and Replenishing the Petty Cash Fund

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