1/17/2023

Learning Objective 1

Prepare financial
statements

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HOW DO YOU PREPARE FINANCIAL

STATEMENTS?

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HOW DO YOU PREPARE FINANCIAL

STATEMENTS?
Smart Touch Learning company began its business at the beginning of
November, 2018.
Below you have the account balances at the end of the month (which are
also the changes in those accounts for the period, since the beginning
balances are zero).
Cash 9,000
Accounts Receivable 1,000
Office Supplies 500
Land 20,000
Accounts Payable 200
Common Stock 30,000
Dividends 5,000
Service Revenue 8,500
Rent Expense 2,000
Salaries Expense 1,200
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HOW DO YOU PREPARE FINANCIAL

STATEMENTS?
• Financial statements are business
documents that are used to communicate
information needed to make business
decisions.

Statement
Statement
Income of Balance
of Cash
Statement Retained Sheet
Flows
Earnings

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The income statement reports the net income

or net loss of the business for a specific period.

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The statement of retained earnings reports how

the company’s retained earnings balance changed
from the beginning to the end of the period.

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The balance sheet reports on the assets,

liabilities, and stockholders’ equity of the
business as of a specific date.

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The statement of cash flows reports the change in cash during the period.

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