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Topics

Business Organizations Introduction to Accounting


What is Accounting? Accounting Concepts Branches of Accounting

Financial Accounting Statements Income Statement


Importance Income Statement Equation Income Statement Heads General Income Statement Equation Importance Net Income and Dividends Importance Assets Liabilities Shareholders Equity Types of Assets, Liabilities, Shareholders Equity

Statement of Retained Earnings Balance Sheet

Financial Statement Example

Business Organizations

Types of Business Organizations


The Business Organizations are broadly divided into five types: 1) Proprietary Business 2) Partnership 3) Hindu Undivided Family 4) Limited Companies 5) Corporations

1. Proprietary Business
It is a business owned and run by single person. It has no separate legal status apart from owner. Advantages Easy start-up and exit. It is flexible (can make decisions quickly). Fewer Government Regulations. No separate status apart from owner. Disadvantages Unlimited personal liability. Limited life of company depends on life of owner. Difficult to raise funds beyond a limit. Size and Efficiency constraints.

2. Partnership
The business is jointly owned by two or more persons. Profits and losses are shared among all. Business may be carried on by all persons or any one of them acting for all. Maximum partners are restricted to 20. Different types of Partnerships are: Partnership by Declaration Partnership by Will Partnership for a specific period.

2. Partnership contd.
Advantages Easy start-up (compared to Limited Companies). Relatively free from Government Regulations. It can attract financial capital easier than sole proprietorships. More efficient operations (specialized people). Disadvantages When a partner dies or leaves, it ends. It must be dissolved legally and reorganized with the remaining partners. Conflicts may arise between partners. Limited ability to raise funds. Responsible for the acts of all the other partners

4. Limited Companies
It is a legal entity. Company exists irrespective of life of shareholders. Liability of members is restricted to value of shares invested in business. Liability does not extend to private property. Companies are governed by Company Act, 1956. Different types of Limited Companies are: Private Limited Company Company Limited Shares Company Limited by Guarantees Unlimited Comapany

Private Limited vs Public Limited Companies


Private Limited Minimum 2 and Maximum 50 persons excluding employees Minimum 2 Directors Cant invite public for subscribing Shares Shareholders cant freely transfer shares to outsiders Public Limited Minimum is 7 and maximum limit is unrestricted Minimum 3 Directors Can invite public for subscribing Shares No restriction on transfer of shares

5. Corporation
A form of business organization that is recognized by the law as having all the legal rights of an individual. Example: Municipal Corporations, Port Trusts etc. They are entrusted by Central or State Government. They have the right to buy & sell property, enter into legal contracts, and to sue and be sued. Advantages Protection by State and unlimited life. Ability to raise funds easily by issuing bonds, selling stocks etc. Disadvantages Subject to Government Regulation, Bureaucracy. Double taxation the firms profits are taxed and also the profit that is distributed to shareholders is taxed.

Introduction to Accounting

What is Accounting?
Accounting is the language of business. Accounting is an Information System both for Insiders and Outsiders and covers information related to various activities in the entire organization/ company. Accounting provides reports to stakeholders about the economic activities and condition of a business. It refers to measurement of economic events and summarising and reporting them in the form of financial statements for use by the stakeholders i.e. bankers, creditors, shareholders, public and Govt. Reporting is the end product of Accounting.

Accounting Concepts
Accounting should be done in such a way that those who use financial statements should receive the same message as conveyed by those who prepare them. Accounting work should be carried on basis on some accounting concepts to reduce the problems and differences in accounting. Some of these concepts are: 1) Money Measurement Concept 2) Business Entity Concept 3) Going Green Concept 4) Cost Concept 5) Dual Aspect Concept 6) Accrual Concept 7) Conservative Concept 8) Materiality Concept 9) Consistency Concept

1. Money Measurement Concept


All events and transactions of the business are recorded in terms of money, at least partially. Only those events that can be measured in terms of money are recorded. Example: Market conditions, technological changes and the efficiency of management would not be disclosed in the accounts. It assumes that the value or purchasing power of money is constant and ignores the effects of inflation or deflation. Importance It provides a common unit of measurement. It enables comparisons. Transactions/ events can be easily

2. Business Entity Concept


The business and its owner(s) are two separate entities. Any private transactions (Incomes, Expenses) related only to the owners should not be treated as the transactions of the business. Example: The owners property should not be included in the premises account of the business. Importance It defines the areas of interest of the financial statement. It indicates what should be included and disclosed in the financial statements. Business affairs kept free from private affairs of owner(s).

3. Going Concern Concept


An firm or enterprise will continue in operation for the foreseeable future and has a long life. It is assumed that the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations. Example: Possible losses form the closure of business will not be anticipated in the accounts. All fixed assets should be valued at historical cost (cost minus proper depreciation ignoring price fluctuation of assets). It lays emphasis on distinguishing Capital Expenditure and Revenue Expenditure. Importance It enables the enterprise to make contracts with others and also carry out plans.

3. Going Concern Concept contd.


Limitations No business can continue forever. Assets valued at historical cost may be misleading unless they are valued at current prices. Financial statements may be misleading if the business is going to close shortly after the balance sheet date.

4. Cost Concept
All assets recorded should be recorded on basis of actual amounts involved. Initially assets are shown on the balance sheet at the cost of purchase instead of current value (Historical Costs). But now-days efforts are made to reconcile the concept with the rapid price fluctuations. Importance It is objective, verifiable and agreed by parties concerned. Limitations It does not show the market value of the assets which is more relevant to users. With an increase in price level, the profits may be overstated.

5. Dual Aspect Concept


The Assets possessed by firm is equal to liabilities to outsiders and capital belonging to owner(s).

Capital = Assets - Liabilities


Out of the available assets, first the claims of outsiders are met and then balance belongs to owner(s). If Capital increases, it results in profits. If it decreases, it results in losses. Importance It enables to have a measure of profits.

6. Accrual Concept
The accrual concept says that Net Income is the difference between revenues and expenses. Revenues are recognized when they earned and not when cash was received. Expenses are recognised when they incurred and not when cash was paid. Financial statements are prepared on the accrual basis of accounting. Example: Expenses incurred but not yet paid in current period should be treated as accrual/accrued expenses under current liabilities. Importance It is more accurate to show the expenses and income for the period. Actual profit is ascertained.

7. Conservative Concept
Revenues and profits are not anticipated. Only realized revenue and profits are recognized in the profit and loss account. Provision is made for all known expenses and losses whether the amount is known for certain or just an estimation. Example: Provision for doubtful debts should be deducted from debtors in balance sheet. Profit is accrued not on acquisition but on the actual sale of product and when outside party becomes legally liable to pay sale proceeds. Importance It reduces chances of users being misled by relying on the overoptimistic results. It minimizes the reported profits and the valuation of assets.

8. Materiality Concept
There are set of guidelines for accounting and disclosure of transactions. Financial statement should separately disclose significant items as they influence decisions of users. Each material item should be presented separately in the financial statements. Materiality depends on the size and nature of the item. Immaterial amounts may be aggregated with the amounts of a similar nature or function and need not be presented separately. Example: Small payments such as postage, stationery and cleaning expenses should not be disclosed separately. They should be grouped together as sundry expenses.

8. Materiality Concept contd.


Importance It ensures proper accounting treatments are applied to material items only. Limitations It may reduce the comparability of different companies if their definitions on material are different. It may affect the objectivity of the financial statements.

9. Consistency Concept
It states that when a firm has chosen a method for the accounting treatment of an item, all similar items should be treated in the same way. Changes can be made if they provide a better way of presenting the accounting data. The change and its effect on profits should be disclosed in the financial statements. Example: Change of Depreciation policy from one period to another (Straight line to Double Declining Method). Importance It is more reliable for comparison of the results of different periods.

Branches of Accounting
Accounting mainly has three branches: 1) Financial Accounting - preparation and communication of financial information mainly for those outside the organisation. 2) Management Accounting - preparation and communication of financial and other information for the internal use of management. 3) Cost Accounting - collation of data for inventory valuation.

Financial Accounting Statements

Financial Statements
Financial Statements are used to provide information about the financial position, performance and cash flow of the enterprise. Financial position includes Economic Resources, Financial Structure and Liquidity and Solvency. Financial statements are used by many users such as: Present and Potential Investors Employees, Management Lenders Security Analysts and Advisers Suppliers and Creditors Customers and Public Governments and Regulatory agencies

Types of Financial Statements


There are 3 basic Financial Statements: Income Statement Statement of Retained Earnings Balance Sheet

Income Statement

Importance
It is also called as Profit and Loss Account. It shows the results of companys operations over a period of time. It provides summary of: Revenues goods sold or services performed by company Expenses costs incurred in normal operations to generate revenues Net Income profit/ loss made by the company It highlights the business performance during the period. Valuable guide in anticipating how a company performs in future.

Income Statement Equation


The Basic Equation for the income statement is:

Revenues Expenses = Profit/ Loss


But a more general and complex Income statement consists of: Net Sales Cost of goods sold Gross profit Operating Expenses Operating Profit Non-operating surplus/ deficit Profit before Interest and Tax (PBIT) Interest Profit before Tax (PBT) Tax Profit after Tax (PAT)

Income Statement Heads


1) Net Sales item includes the amount reported after taking into
consideration returned goods, allowances for price reductions or discounts and excise duty paid to the government.

Net Sales = Sales Sales Inward Discounts Excise Duty


Sales sum of invoice price of goods sold or services rendered Sales Inwards - value of goods returned by customer

2) Cost of goods represents all the costs the company incurs to


purchase and convert the raw materials into the finished products that it sells. It includes three cost components: Direct Material Direct Labour Company Overheads (Ex. Rent, Electricity, Maintenance and Repairs etc.)

Income Statement Heads contd.


3) Gross Profit is the excess of sales over cost of goods sold. It
represents the actual direct profit from sales after considering product costs.

Gross Profit = Net Sales Cost of Goods Sold 4) Operating Expenses includes general administrative expenses,
selling and distribution expenses and depreciation. Examples of operating expenses are: Sales agents salaries and commissions Advertising and promotion Travel and entertainment Executives salaries Office payroll and expenses

Income Statement Heads contd.


5) Operating Profit is the difference between Gross Profit and
Operating Expenses..

Operating Profit = Gross Profit Operating Expenses 6) Non-Operating surplus/ deficit represents gains/ losses arising
from sources other than normal operations of company. Examples of Non-operating surplus/ deficit includes: Investments in stocks and bonds Gain and losses on sale of equipment

7) Profit before Interest and Tax (PBIT) is the sum of Operating


profit and Non-operating surplus/ deficit.

PBIT = Operating Profit + Non-Operating Surplus/ deficit

Income Statement Heads contd.


8) Interest is the expense incurred for borrowed funds like loans,
debentures, public deposits and working capital advances. It is sometimes referred to as Fixed Charge as it must be paid year after year.

9) Profit before Tax (PBT) is the obtained by deducting interest from


Profit before Interest and Tax.

PBT = PBIT - Interest 10) Profit after Tax is the difference between PBT and Tax for the
period.

PAT = PBT - Tax

General Income Statement Equation


The General Equation for the income statement is: Net Sales (-) = (-) = (+/ -) = (-) = (-) = Cost of goods sold Gross Profit Operating Expenses Operating Profit Non-Operating Surplus/ deficit Profit before Interest and Tax Interest Profit before Tax Tax Profit after Tax

Statement of Retained Earnings

Importance
Indicates how Net Income and Dividends affect Financial position of the company during the period. Identifies changes in Retained Earnings from one accounting period to the next.

Dividends is the amount earmarked for distribution to stakeholders.


They are declared by the board of directors of the company.

Retained Earnings is the difference between profit after tax and


dividends. Beginning retained earnings (+) () = Net income Dividends paid Ending retained earnings

Net Income and Dividends


Net Income results in: Increase in Net Assets Increase in Retained Earnings Increase in Owners Equity

Dividends results in: Decrease in Net Assets Decrease in Retained Earnings Decrease in Owners Equity

Balance Sheet

Importance
It is the Summary of the financial position of a company at a particular date. It indicates the following: What are the Resources of the company What are the companys existing obligations What are the companys Net Assets The Balance Sheet is Divided into two halves: Assets Liabilities and Shareholders equity The standard Balance Sheet Equation is:

Assets = Liabilities + Shareholders Equity (Uses of Funds = Sources of Funds)

Assets
The Assets section includes all the goods and property owned by the company, and uncollected amounts due (receivables) to the company from others. Assets are acquired at specific monetary value by the company to conduct its operations. They have potential to contribute (directly or indirectly) to the flow of cash or cash equivalents to the company. Physical form is not essential to the existence of the asset. Legal right of ownership not essential in establishing the existence of asset. Assets are listed in order of liquidity. Examples of Assets are Land, Vehicles, Buildings, Plant and Machinery etc.

Liabilities
The Liabilities section includes all debts and amounts owed (payables) to outside parties. These are the obligations of the company at present to be settled in future. Obligations may be due to a binding contract or statutory requirement. Present obligations and future commitments differ from each other. Liabilities are listed in order of maturity. Examples of Liabilities are Accounts payable, Bonds payable.

Shareholders Equity
The Shareholders Equity section represents the shareholders ownership interest in the company. It indicates what the companys assets would be worth after all claims upon those assets were paid. It consists of Contributed Capital (cash raised from issuance of shares) and Earned Capital (Retained Earnings). Shareholders Equity is the Book Value of the Company. It is equal to excess of Assets over Liabilities. Change in Net Assets results in Change in Equity.

Types of Assets
Assets can be either Current Assets or Non-Current Assets. Current Assets are the assets that are used or turned into cash in short term (usually within an year of the balance sheet). Examples of Current Assets are cash, accounts receivables, short term investments, supplies etc. Non-Current Assets comprise the remaining. Examples of Non-Current Assets are land, buildings, long term investments etc. Assets are basically classified into three types: 1) Fixed Assets 2) Investments 3) Current Assets, Loans and Advances

1. Fixed Assets
Fixed Assets are the assets that acquired for longer periods of time.
They are not intended for resale. The category includes: a) b) c) d) e) Land Building Machinery, Equipment Automobiles Furniture

Fixed assets are reported as Cost minus depreciation accumulated through the date of Balance Sheet. The cost of acquired fixed assets is allocated over the useful life of assets. Depreciation is accumulated over the period of time and is shown as Accumulated Depreciation.

2. Investments
Investments are the financial securities owned by the company.
This category includes: a) Investment in government securities b) Investment in shares, debentures and bonds c) Investment in immovable properties d) Investment in the capital of partnership firms

3. Current Assets, Loans and Liabilities


Current Assets include:
a) Cash b) Debtors/ Accounts Receivables c) Inventories d) Prepaid Expenses Cash denotes funds readily disbursable by company. It is the money deposited in banks, currency on hand and highly liquid securities as Treasury Bills. Accounts Receivables are amounts due from customers that havent been collected yet for sale of goods, services on credit. Debtors are shown in balance sheet at amount owned less an allowance for bad/ doubtful debts to be paid by customers.

3. Current Assets, Loans and Liabilities contd.


Inventories consist of Raw materials, work-in-progress, finished goods, and stores and spares. Raw materials Inventory Items to be used in making product. Work-in-progress Inventory partially completed goods. Finished goods Inventory completed items ready for shipment. In valuing inventories, the lower of cost or market rule or method is used. This rule values inventory at its cost or market price, whichever is lower. Market value is the current cost of replacing the inventory by purchase or manufacture. Where deterioration/ obsolescence/ a decline in prices/ other factors are expected to result in the selling or disposing of inventories below cost, the lower market price would be used.

3. Current Assets, Loans and Liabilities contd.


Prepaid Expenses are expenditures incurred for services to be rendered in future. Payments made for which the company had not yet received benefits, but for which it will receive benefits within the year, are current assets as prepaid expenses. Loans and Advances comprise of: Amounts loaned to employees Advances paid to suppliers Advances paid to contractors

Types of Liabilities
Liabilities can be either Current Liabilities or Long Term Assets. Current Liabilities are the obligations that are due or payable within short term (usually within an year of the balance sheet). These may be paid in cash or satisfied by providing service. Examples of Current Liabilities are Accounts payable, Taxes payable etc. Long Term Liabilities are the obligations which are not paid or satisfied within one year. Examples of Long Term Liabilities Bonds payable, mortgage payable.

Total Liabilities = Current Liabilities + Long Term Liabilities

1. Current Liabilities
Current Liabilities are classified into five types:
a) Accounts Payable b) Notes Payable c) Accrued Expenses d) Income Taxes Payable e) Other Current Liabilities (Advance Payments, Unpaid Dividends) Creditors/ Accounts payable are the liabilities on account of goods/ services purchased on credit. These are amounts owed by the company to its regular business creditors for routine purchases. Notes payable is the money owed to a bank, individual, corporation or other lender under a promissory note. Borrower named in the note is responsible for repaying the loan principal plus any interest charges.

1. Current Liabilities contd.


Accrued Wages is the money owed by company on account of: Salaries and Wages to its employees Interest on funds borrowed from Banks and Bondholders Fees to Attorneys Income Taxes payable are the amounts due to taxing authorities (Internal Revenue Service) within one year form the balance-sheet date. For financial-reporting purposes, they are treated the same as an Accrued Expense. Companies that owe a material amount of taxes often report Income Taxes payables separately. Advance Payments These are the payments received in advance for the goods or services to be supplied in future.

2. Long Term Liabilities


Long Term Liabilities are classified into:
a) Deferred Income Taxes b) Long Term Secured Loans c) Long Term Unsecured Loans Deferred Income Taxes are the liabilities a company may postpone from paying until some future time, often to encourage activities for the publics good. The government provides businesses with tax incentives to make certain kinds of investments that will benefit the economy as a whole. Ex: Accelerated Depreciation deductions for Tax reporting purposes. These rapid deductions for tax purposes in the early years of investment reduce the amount of tax the company would otherwise owe currently (within 1 year) and defer payment into the future (beyond 1 year).

2. Long Term Liabilities contd.


Secured Loans are the borrowings of the company against which specific services have been provided. Secured Loans consist of: Debentures Loans from Financial Institutions Loans from Commercial Banks Debentures denoted the money received by the company as a loan from the bondholders, who in turn were given certificates called Bonds, as evidence of the loan. Bonds are generally formal promissory notes issued by the company, which agrees to repay at maturity with some interest. Bonds interest is usually payable semi-annually.

2. Long Term Liabilities contd.


Companies can also issue secured debt (mortgage bonds), which offers bondholders an added safeguard because they are secured by a mortgage on all or some of the companys property. If the company is unable to pay the bonds when they are due, holders of mortgage bonds have a claim or lien before other creditors (such as debenture holders) on the mortgaged assets. The assets can be sold and are used to satisfy the debt owed. Unsecured Loans are the borrowings of the company against which no specific services have been provided. Unsecured Loans consist of: Fixed Deposits Loans and advances from Promoters Inter-corporate borrowings Unsecured Loans from Banks

Types of Shareholders Equity


Shareholders Equity is broadly divided into three types: 1) Share Capital a) Equity Capital b) Preference Capital 2) Additional Paid in Capital 3) Reserves and Surplus

1. Share Capital
Share Capital is also referred to as Capital Stock which represents
shares in the ownership of the company. It is two common types: a) Equity Capital b) Preference Capital Equity Capital Equity Capital represents the contribution of equity shareholders who are owners of the firm. It carries no fixed rate of interest. It is also termed as Common Stock and has no limit on dividends payable each year.

1. Share Capital contd.


Preference Capital Preference Capital represents the contribution of preference shareholders. It carries fixed dividend rate of interest. In other words it is termed as Preferred Stock which is an equity ownership interest that has preference over common shares with regard to dividends and the distribution of assets in case of liquidation. Preferred shareholders are entitled to dividends before common shareholders. Preferred shareholders have no voice in company affairs unless the company fails to pay them dividends at the promised rate.

2. Additional Paid-In Capital


Additional Paid-In Capital is used to account for that amount which
a firm raises in excess of the par value (nominal value) of the shares (common stock). It is also called Paid-In Capital in excess of par.

Contributed Capital = Share Capital + Additional Paid-In Capital

3. Reserves and Surplus


Reserves and Surplus represent the utilization of profits made by the
company. Part of the profits are transferred to a Reserve and balance is retained in the profit and loss account. Reserves There are two types of Reserves: Revenue Reserves Capital Reserves Revenue Reserves arise out of gains from normal business operations. These are held in the form of General Reserve, Investment Allowance Reserve, Capital Redemption Reserve, Dividend Equalization Reserve etc.

3. Reserves and Surplus contd.


Capital Reserves arise out of gains not related to normal business operations. Examples of such gains are premium on issue of shares or gains on revaluation of assets. The reserve created out of profits transferred from profit and loss account is stored as called general reserve. The company can use the general reserve for various purposes including issue of bonus shares to shareholders and payment of dividend when profits are insufficient.
Surplus

The balance profits is retained in the Profit and loss account as Retained Earnings. These are reinvested or retained in the company. Retained earnings increase by the amount of profits earned, less dividends declared to shareholders.

Order of Preparation of Financial Statements

Income Statement Net Income

Statement of Retained Earnings Beginning Retained Earnings (+) () = Net income Dividends paid Ending Retained Earnings

Balance Sheet

Ending Balance Retained Earnings

Example: Financial Statement of M/s ABC Company


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 1: Identify Assets, Liabilities, Equity, Revenues, Expenses


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 1: Identify Assets, Liabilities, Equity, Revenues, Expenses


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 1: Identify Assets, Liabilities, Equity, Revenues, Expenses


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 1: Identify Assets, Liabilities, Equity, Revenues, Expenses


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 1: Identify Assets, Liabilities, Equity, Revenues, Expenses


Cash Utility Expense Common Stock Supplies 5,000 8,000 45,000 4,000 Sales Buildings 100,000 65,000

Accounts Payable 12,000 Cost of Goods Sold 58,000

Interest Expense Bonds Payable Salaries Expense Inventories Tax Rate

5,000 40,000 16,000 45,000 30%

Additional Paid in 20,000 Capital Supplies Expense Accounts Receivable Retained Earnings 3,000 10,000 5,000

Step 2: Income Tax Statement


Sales (-) Cost of Goods Sold Gross Profit (-) Operating Expenses (Utility Expense + Salaries + Supplies Expense) Operating Profit (-) Non-Operating Deficit (Interest Expense) Profit Before Tax (-) Tax @30% Profit After Tax 10,000 3,000 7,000 15,000 -5,000 100,000 -58,000 42,000 -27,000

Step 3: Statement of Retained Earnings


Beginning Retained Earnings (+) Net Income (Profit After Tax) Ending Retained Earnings 5,000 7,000 12,000

Step 4: Balance Sheet


Current Assets: Cash Accounts Receivables Inventories Supplies Non-Current Assets: Buildings 65,000 5,000 10,000 45,000 4,000 Current Liabilities: Accounts Payable Long Term Liabilities: Bonds Payable Shareholders Equity Common Stock Additional Paid in Capital Retained Earnings Total Assets 129,000 Total Liabilities 45,000 20,000 12,000 129,000 40,000 12,000