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THE BALANCE SHEET
The balance sheet shows what you own and what you owe on a specific date.
A balance sheet consists of a heading that includes the legal name
of the business and the ‘as of’ date. The ‘as of’ date
relates to the close of business date that the balance sheet was prepared.
The balance sheet also contains a body that is divided into two sections:
assets and liabilities & owners’ equity. These sections must
balance or equal one another. An example of a balance sheet for the
A+ Widget Company is shown below.
A+ WIDGET COMPANY
BALANCE SHEET
DECEMBER 31, 2002
|
| |
ASSETS
|
|
| Current Assets |
|
|
|
| Cash |
|
$10,000 |
|
| Accounts Receivable |
|
1,050 |
|
| Widget Inventory |
|
2,000 |
|
| Office Supplies |
|
550 |
|
| Total Current Assets |
|
|
$13,600 |
| Plant and Equipment |
|
|
|
| Office Equipment |
$1,800 |
|
|
| Less Accumulated Depreciation |
480 |
|
|
| |
|
1,320 |
|
| Buildings |
95,000 |
|
|
| Less Accumulated Depreciation |
9,300 |
|
|
| |
|
85,700 |
|
| Land |
|
40,000 |
|
| Total Plant and Equipment |
|
|
127,020 |
| Total Assets |
|
|
$140,620 |
| |
LIABILITIES |
|
| Current Liabilities |
|
|
|
| Accounts Payable |
|
$3,000 |
|
| Accrued Wages |
|
5,300 |
|
| Sales Tax Payable |
|
900 |
|
| Total Liabilities |
|
|
$9,200 |
| |
OWNER'S EQUITY |
|
| D.R. Strangelove, capital |
|
$100,000 |
|
| Emelia Bedelia, capital |
|
31,420 |
|
| Total Owners’ Equity |
|
|
131,420 |
| Total Liabilities and Owners’ Equity |
|
|
$140,620 |
THE INCOME STATEMENT
The income statement shows whether or not your business has made a profit
within a specified reporting period, and is also referred to as a profit
and loss statement or operating statement. The income statement, like
the balance sheet, consists of a heading and a body. The body of the
income statement is different than that of the balance sheet; it shows
the revenue and expenses for your business. An example of an income
statement for the RST Company is shown below.
RST COMPANY
INCOME STATEMENT FOR THE YEAR ENDED JANUARY 1, 2003
|
| REVENUE |
|
$500,000 |
| COST OF GOODS SOLD |
|
|
| |
Inventory, beginning of the year |
$65,000 |
|
| |
Direct Labour |
163,000 |
|
| |
Materials and Supplies |
152,000 |
|
| |
Inventory, end of year |
(105,000) |
|
| |
|
|
275,000 |
| GROSS PROFIT |
|
225,000 |
| EXPENSES |
|
|
| |
Advertising and Promotion |
20,000 |
|
| |
Depreciation, equipment |
12,500 |
|
| |
Utilities |
43,200 |
|
| |
Insurance |
2,000 |
|
| |
Professional Fees |
15,000 |
|
| |
Salaries and Benefits |
95,000 |
|
| |
Office Supplies |
5,000 |
|
| |
|
|
192,700 |
| NET INCOME BEFORE TAXES |
|
32,300 |
| |
less income tax @ 19% |
|
6,137 |
| NET INCOME |
|
$26,163 |
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