basics-of-accounting-information-processing

Note that the income statement relates to activities

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Unformatted text preview: December 31, 20X9 Revenues S ervices to customers I nterest revenue $750,000 15,000 Total revenues $765,000 Expenses * S alaries R ent O ther operating expenses $235,000 115,000 300,000 Total expenses 650,000 Net income $115,000 Download free eBooks at bookboon.com 21 Basics of Accounting & Information Processing The Core Financial Statements 5.3 The Statement of Retained Earnings The example balance sheets for Edelweiss revealed how retained earnings increased and decreased in response to events that impacted income. You also know that retained earnings are reduced by dividends paid to shareholders. Beginning Retained * Earnings Net e Incom Div Ending Retained Earnings OR Net Loss Beginning Retained Earnings Div ide ide nds nds Ending Retained Earnings 360° thinking Please click the advert . 360° thinking . 360° thinking . Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities. Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities. Download free eBooks at bookboon.com © Deloitte & Touche LLP and affiliated entities. 2 at Discover the truth 2 www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities. Di Basics of Accounting & Information Processing The Core Financial Statements The statement of retained earnings provides a succinct reporting of these changes in retained earnings from one period to the next. In essence, the statement is nothing more than a reconciliation or “bird’seye view” of the bridge between the retained earnings amounts appearing on two successive balance sheets. Q UARTZ CORPORATION Statement of Retained Earnings For the Year Ending December 31, 20X9 Retained earnings - January 1, 20X9 * Plus: Net income $400,000 115,000 $515,000 Less: Dividends 35,000 Retained earnings - December 31, 20X9 $480,000 If you examine very many sets of financial statements, you will soon discover that many companies provide an expanded statement of stockholders’ equity in lieu of the required statement of retained earnings. The statement of stockholders’ equity portrays not only the changes in retained earnings, but also changes in other equity accounts such as capital stock. The expanded statement of stockholders’ equity is presented in a subsequent chapter. 5.4 Balance Sheet The balance sheet focuses on the accounting equation by revealing the economic resources owned by an entity and the claims against those resources (liabilities and owners’ equity). The balance sheet is prepared as of a specific date, whereas the income statement and statement of retained earnings cover a period of time. Accordingly, it is sometimes said that balance sheets portray financial position (or condition) while other statements reflect results of operations. Quartz’s balance sheet is as follows: QUARTZ CORPORATION Balance Sheet December 31, 20X9 Assets C ash A ccounts receivable L and O ther assets * $192,000 248,000 450,000 10,000 Tot...
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