Accounting 2

1
Chapter 2.2

• Accounting 2

2
Financial Statements

• The Income Statement
• The Statement of Retained Earnings
• The Balance Sheet

3
Income Statement

• Revenue
• Cost of Merchandise Sold
• Gross Profit on Sales
• Operating Expenses
• Net Income

4
Revenue

• Net sales
• Sales
• Sales Discounts
• Sales Returns and Allowances
• Net Sales

5
Cost of Merchandise Sold

• Purchases
• Transportation In
• Cost of Delivered Merchandise
• -Purchase Discounts
• -Purchase returns and Allowances
• Net Purchases

• Beginning Merchandise Inventory
• Net Purchases
• Cost of Merchandise Available for Sale
• -Ending Merchandise Inventory
• Cost of Merchandise Sold

6
Gross Profit on Sales

• Net Sales
• -Cost of Merchandise Sold
• Gross Profit On Sales

7
Operating Expenses

• List all Expenses in order except Federal
  Corporate Tax

8
net Income

• Gross Profit on Sales
• -Total Operating Expenses
• Operating Income
• -Federal Corporate Income Taxes
• Net Income

9
Statement of retained Earnings

• Must be completed before Balance Sheet after
  Income Statement
• Increased by net income
• Decreased by net loss
• Decreased by distribution of earnings to stock
  holders
• Beginning Retained Earnings and net income from
  the worksheet
• Ending Retained Earnings goes on balance sheet

10
Balance sheet

• A report of the accounting equation
• Assets, Liabilities and Capital Stock come from
  the worksheet
• Retained Earnings come from the Statement of
  Retained Earnings

11
Closing Entries

• Close all temporary accounts to the Income
  Summary Account
• Information comes from the Income Statement

12
Closing entries

• Close Expenses to Income Summary
• Close Income Summary to Retained Earnings

13
Posting Closing Entries
14
Post-Closing trial balance

• Shows Balances in permanent accounts only
• Proves debits and credits equal
• Ensures temp accounts are closed