All right welcome back everybody I know I
assigned some homework in regards to transaction analysis just to repeat a few things that
I said last lecture transaction analysis is that first skill I want to make sure you guys
master. So as we go through these I want you to be
responsible and start to be able to ask yourselves do I really understand this. With accounting if at any point and you realize
I don't know what he's doing I don't know how to do this. That's when you to come into office hours
come into to tutoring folks at home email me you can come into tutoring as well, but
I want to make sure that you don't let that go on.
You don't want to procrastinate with accounting,
because everything builds on each other alright. I kind of gave you some, but I gave them to
you in a little different order didn't I, I kind of gave you my own unique order. What was the first one I gave you? One-twelve well then let's do exercise one-twelve
ok. Ok exercise one-twelve Zelda began a new consulting
firm on January the fifth the accounting equation showed the following balances after each of
the companies first five transactions analyze the accounting equation for each transaction
to describe each of the five transactions so this is a little similar to the one that
we did in class the other day isn't it? The only difference here is now you kind of
look at the balances and see what the change was its not telling you the change it's actually
telling you what the balance is ok. Now the first one transaction A this is the
very first transaction of the business isn't it so everything was zero before that now
cash is twenty thousand Zelda capital is twenty thousand so obviously what happened here? That's right Zelda invested twenty thousand
dollars of her personal money into the business very good that's A.
In B we see that cash went down by a thousand
office supplies went up by fifteen hundred and accounts payable went up by five hundred
ok. What happened there? Look like she bought some office supplies
she bought fifteen hundred dollars' worth of office supplies by paying a thousand dollars
cash and the remainder putting on account or on credit so there's now a account five
hundred dollar payable correct.
Good C cash went down by eight thousand and
office furniture went up by eight thousand looks like she used eight thousand dollars
cash to buy some furniture for her office is that correct? D let's see what changed accounts receivable
went up by three thousand and revenues went up by three thousand looks like she provided
services to her client on credit and they will pay her later so she has an accounts
receivable ok she will receive money in the future.
And then lastly looks like cash went up by
fifteen hundred oh no by five hundred I'm sorry on transaction E cash went up by five
hundred and revenues went up by five hundred. So it looks like she provided services to
a client and they paid her five hundred dollars right there for the entire five hundred amount
worth of services agreed? Alright any questions on that one? What was the next one I assigned one-ten ok
good? Exercise one-ten provide an example of each
transaction that described the detailed effects of separate cases now some of these have more
than one, some of these have more than one.
So transaction A increases an asset and decreases
an asset, what do you guys think? There's one or more answer. Ok a couple of examples that you gave me good
you purchased supplies using cash or you purchased equipment using cash ok very good. Equipment or supplies would go up those are
assets and cash which is an asset goes down. Any others? How about the collection of an accounts receivable
let's say we have a accounts receivable for five hundred dollars and they paid us cash
well the receivable would go down that's an asset, what would go up, cash that's an asset
right? One asset went down one asset went up ok so
that's another an example.
Exercise one-ten uh B decreases an asset and
decreases a liability what do you think? Paid something like paid an accounts payable
ok good. Paid something that was already on the books
that was payable ok good. So the accounts payable went down and cash
went down any other examples. Paying a note payable really any sort of payable. Paying taxes payable salaries payable any
sort of liability the liability decreases the cash which is an asset decreases. D increases an asset and increases a liability
what do you think? Did I skip C sorry? Let's go back to C. C decreases a liability
and increases a liability this is kind of a weird one. You thought he was going to try to skip this
one and get out of it right? Decreases a liability and increases a liability
ok what do you think? oK and that sounds kind of weird, but let's
say a company had a taxes payable right the IRS started banging on their door saying you
owe us taxes we have a taxes payable on the books.
Well we don't have the cash right now so we
go to our friendly bank and we get a loan. So we can pay our taxes so taxes payable which
is a liability goes down, notes payable which is also liability goes up ok. I'll give you another example I'll give you
a couple of other examples. My wife and I we just refinanced our home
we're actually going through the process right now so we have a mortgage payable at a certain
interest rate and were going to pay that one off with a new mortgage payable why would
we do that? Lower interest rate think we're moving from
like four point two five we are getting rid of that mortgage and were going to three and
five eighths, three and five eighths for a mortgage that's unbelievable ok.
So our old mortgage payable is going down
our new mortgage payable is going up. The advantage is decreased interest. Now a company can have a mortgage payable
as well can't they? They can have a mortgage payable on their
office building. Or on a big piece of equipment that wouldn't
be a mortgage but you see what I'm saying. One more example, one more example lets ay
my company has an accounts payable for two thousand dollars to a vendor we have an accounts
payable it's a liability for two thousand dollars to a vendor well let's say we're having
a little cash crunch right now. So I go to that vendor and we worked with
that vendor for a long time, and I say hey we are having cash troubles I know we have
an accounts payable to you I know we owe you this money for two thousand dollars, but you
know is there some way we can set up a payment plan or something.
Will usually vendors are very happy if you
go to them with, has anybody here have ever done collections, no pray that you never have
to it's not fun. But when people owe you money if they're having
trouble paying you, and they come to you and they want to set up a payment plan most people
are pretty nice about that. Ok so our vendor might say thank you for doing
that here is what we'll do let's get rid of your accounts payable and let's set up a note
payable. And they might have us sign something and
let's say let's have you pay it off over time let's say a couple hundred dollars every month
maybe for ten or eleven months or something like that, and we're going to go ahead and
charge you interest a little bit of interest four percent and since it's going to be paid
off over the next year we go ahead and sign the note so that they feel a little bit better
ok.
So you don't have a real old on their books
a receivable ok. You see what I'm saying? So we got rid of our account payable and we
set up a note payable with our vendor alright so that's another example. Ok good any others? Ok now let's go to D increases an asset and
increases a liability. What do you think? Ok good Kara is it Kara? Ok good I'm getting better with names. Alright we buy office supplies on credit office
supplies which is an asset goes up accounts payable goes up right. What other ones there's some other ones to? How about getting a loan? Getting a loan from a bank, cash goes up notes
payable goes up that's an asset that's a liability.
And actually buying anything on credit right
furniture on credit or whatever ok good. E decreases an asset and decreases equity,
decreases an asset and decreases equity what do you think? There's a few on here too. Ok withdrawing perhaps cash from the company
ok. Withdrawals goes up but equity goes down from
our quiz that we had from our second lecture second or third right? The owner withdraws cash so cash which is
an asset goes down and withdraws is one of those things that decreases equity very good
any other examples for this? Another one would be paying an expense with
cash.
Let's say I pay rent expense for the month
ok. Well rent expense isn't expenses one of those
things that decreases equity? OK so I pay that rent expense equity goes
down and the cash that I used to pay that rent expense also decreases right? So that would be another example ok. Alright F increases a liability and decreases
equity. You know I don't want to really concentrate
on that one too much, because that's kind of a chapter three kind of a chapter three
question and we aren't in chapter three are we? Curiously did anyone come up with anything? I put took out a loan and took cash for their
pesonal use.
It's not bad, it's not bad ok not a bad one
the only thing is that would probably be two separate transactions you know cash in cash
out what this is and I know it will bother you for the rest of your life. Is this would be like and this actually happens
quite a bit actually you receive a bill, you receive a bill and so you put it on the books
as a liability you're not going to pay it right now and you put the expense on your
books it's called a accruing on the expense.
So don't really worry about that one I mean
really don't really worry about it for now when you're studying for your test don't sweat
that one you can almost ignore it. That will be chapter three, and G increases
an asset and increases equity what do you think? Couple there too. Cash into the- Well you're right but be more
specific. Ok increases an asset and increases equity
so you perform a service for a customer and think about revenue goes up so equity goes
up right? If they pay you in cash your asset in cash
goes up right. If we perform this on credit our accounts
receivable goes up which is also an asset isn't it so really preforming services for
a client either way whether they pay us cash right then or we book it as a receivable either
way an asset increases and equity increases ok good. There's one other one. If the owner bought something with their own
money. I have to think through that one see an owner
bought something with their own money I have to think through that one that's not the one
I was thinking of ok, but I would have to think through that one you mean they are going
to get reimbursed by the company or something like that.
That may not be I'm not just going to go down
that road just yet and we'll get there and what concept does that kind of violate. Do you remember I was talking about we haven't
talked about the business entity or have we? We're going to talk about the business entity
concept soon. What the business entity concept is, is if
I have a landscaping business I don't want to I want to keep my landscaping business
the check book, the records, and everything separate from my personal life. When I go to a client when they do something
like that Anna is it Anna? Oh getting better.
When they do something like that I'm like
please don't make it a habit and you can reimburse yourself but please don't be using your personal
check book to buy things for the company or worse yet don't be using the company check
book to pay your daycare bill or whatever let's keep those things separate business
entity. Marlin? How is that different from making a personal
withdrawal? Well but see it's a good question how is that
different for a withdrawal and that's how well end up treating it as but what I tell
my clients is take the money out of the company book it to withdrawals and then once you have
that money in your personal life then pay that daycare bill, but when you write a check
from the company checkbook to the daycare ehhhh…
Then you've really got to set up
in your accounting system your daycare as a vendor, and it's just ehh right? You don't want to do it too much or if a company
or if an owner has two businesses keep those businesses separately you know. You just want to keep everything neat as you
can not so much because you're anal retentive but because a big part of accounting is that
somebody can go in and understand what you've done. Oh the other one was for this one is the one
I was trying to get to Anna was an owner invests personal money into the company right? Owner invest cash into the company cash goes
up and what else goes up equity goes up from our quiz right.
Ok good what's next exercise one-eleven? Ok now this is really where the rubber hits
the road as far as do we know how to analyze these transactions? Do we know how to analyze these transactions? And I want you to become adept at this If
we don't know how to do this if you're totally confused then we need to get together get
to office hours or whatever, because this is a crucial part of accounting ok. Ok I hope you used your work papers I think
I showed you your work papers last class ok. But lets go to exercise one-eleven Lena Gold
began a professional practice on June one and plans to prepare financial statements
at the end of each month during June Gold the owner completed these transactions. Owner invested fifty thousand dollars cash
in the company along with equipment that had a ten thousand dollar market value. Ok the first thing you want to ask is what
accounts were affected, and then the next question is did those accounts increase or
decrease by how much. In this situation cash went up by fifty thousand,
equipment went up by ten thousand, and this is one of those things that increases capital
or equity isn't it? It went up by sixty thousand.
Transaction B the company paid sixteen hundred
dollars cash for rent of office space for the month. Now I want to change this a little bit but
what happened is cash went down right? Now I don't really like the way that they
show this I'm going to zoom in, I really wish they would have said expenses went up, because
that's what they did expenses went up right? Now this minus sign says yes eventually we're
going to subtract expenses when calculating equity, but expenses did not decrease expenses
increased does that make sense? Now what they do after each transaction and
it gets a little tiresome so if you didn't do it that's ok is then they recalculated
the balances, and the main reason they did that is they want to hammer home the idea
that assets always equals liabilities plus owner's equity at any point we can figure
out the balances figure up our total assets in this case our total assets is what fifty
eight four hundred when I add those two together and is that capital minus sixteen hundred
expenses that's fifty eight four hundred too isn't it? Right there's no liabilities yet so at any
point we can do that.
Transaction C the company purchased twelve
thousands of additional equipment on credit so what is affected well equipment goes up
and accounts payable goes up and then we figure out our new balances. Any questions on transactions A through C
please don't hesitate to ask if you've got the question I guarantee there's other people
do especially at home. Ok transaction D the company completed work
for a client and immediately collected the two thousand dollars as earned. Cash goes up and revenues go up by two thousand
right? Cash goes up and revenues goes up by two thousand. Anybody has a question they got something
different and they want to know why it's not true? You can tell me your wrong answer and I'll
just shoot it down right there in front of everyone on television ok no I'm kidding not
really.
Cash goes up by two thousand and revenues
goes up by two thousand ok. E the company completed work for a client
and sent a bill for seven thousand dollars to be received within thirty days. Ok our revenue goes up right our revenues
go up, because this is the revenues recognition principle even though we haven't been paid
we recognize this as revenue because we've completed the service the service has been
delivered to the customer and accounts receivable goes up that's another asset.
Figure our balances everything is good. Ok transaction F the company purchased additional
equipment for eight thousand cash, cash goes down by eight thousand equipment goes up by
eight thousand right? Does that make sense? See if I can get that a little larger I know
this one's is kind of hard to see the answers. Ok they refigured the balances assets still
equal liabilities plus owner's equity. Ok transaction G the company paid an assistant
twenty four hundred dollars cash of wages for the month. Cash goes down once again I'm going to add
this little plus sign here, because your expenses actually go up don't they? Yes those will be subtracted yes those will
be subtracted when we figure out total equity but your expenses go up don't they. Refigure the new balances here's what we got. H the company collected five thousand cash
as partial payment owed by the client in transaction E. So what happens here? Revenue is not affected at all, all that happens
is cash goes up by five thousand and our receivable goes down by five thousand everything still
hold? Yes transaction I the company paid twelve
thousand dollars cash to settle the liability created in transaction C.
Well our cash goes
down by twelve thousand as does our accounts payable by twelve thousand right? Ok good everything still holds right? Accounting equation is still valid. And lastly the owner withdrew five hundred
dollars cash from the company for personal use. What is affected there? Cash goes down by five hundred this is kind
of like that other situation our withdrawals actually goes up ,but withdrawals will be
subtracted when we figure out total equity right? So withdrawals goes up which decreases equity
and assets go down because cash decreased.
And then they give us our final balance k
see those. Does the accounting equation hold after analyzing
all these transactions? Yup it does ok, any questions on that? How did you guys do on that? I want to make sure you know how to do that
ok. If you're like thinking I don't know what
he just did or you were just getting tons of them wrong ok that's alright recognize
it now though and lets work on that together shoot me an email for you folks at home come
into tutoring office hour look through it again and try it again. The best way to assess and you're going to
hear me over and over say this you're going to her me say this this a lot during the semester
the best way that you can assess if you know this is to get a blank piece of paper out
look at the question and see if you can do it.
And you are like what else you can do a lot
of student s get it all wrong and then they look at the answer ok now I understand it
now I can see what he did. Well just looking at what I did and understanding
what I did that doesn't mean you can do it. Does that make sense? I can watch Tiger Woods play golf and I can
understand what he's doing, does that mean I can go out and hit the ball like Tiger Woods? No. So don't just look over it and go does this
make sense no get a blank piece of paper out set it aside if you got a lot of them wrong
set it aside may be tonight get a blank piece of paper out don't look at the answer and
see if you can do it ok.
Ok what I want to do now what was the I think
I assigned exercise one eight and was that the last one ok. I'm going to hold off on that one for now
might go through that at the end of lecture but I want to make sure I get through the
lecture ok. So If we don't go over exercise one eight
today we will go over it next lecture cool. I want to talk about a very important subject
today, and that is going to be the financial statements. I want to start introducing the four financial
statements now do you remember on what I said during the first lectures that? Financial accounting is primarily satisfying
the needs of external users we provide information for those external users so they can make
better decisions right. Well these four financial statements take
a look at the screen these four financial statements are primarily what we prepare as
far as information for those external users, the income statement, the statement of owners'
equity, the balance sheet, and the statement for cash flows. Now I want to point out something that I don't
think the book makes as big a point that they should these are the order that you provide
these in ok.
So you have to prepare the income statement
then the statement of equity then the balance sheet and then the statement of cash flows
one of the things that I guarantee you have to do on the test is to prepare the first
three financial statements. And here's how I know a student doesn't know
what they're doing when I tell them prepare three financial statements and they start
on the balance sheets no you can't do that you have to do the income stamen and when
you're done with the income statement you do the statement of equity or owners' equity
and then you do the balance sheet and the reason is one flows into the next which flows
into the next and we'll see that ok. Let's take a look at the incomes statement
first now the income statement sometimes it's called the P&L which stands for profit and
lost this one is intuitive the income statement is very intuitive as a matter of fact we use
a lot of terminology in our lives.
That kind of go back to this you ever hear
somebody say hey well what's the bottom line here what's the bottom line well they are
kind of referring to a income statement. The income statement as in this case it shows
the revenues for a company less their expenses and hopefully that equals a positive number
and that will be an net income. Revenues minus expenses equals a net income. This example that you're looking on the screen
it's a very simplified example isn't it there's one revenue account and there's one expense
account. Now normally there's number of revenue accounts
and you want to list those out and then do a total revenue normally there's a number
of expense account you want to list those out do a total expense. But this shows the revenues minus the expenses
and resulting net income in this case. Now can you ever have your expenses for a
period of time be greater than your revenues yes.
What's that called not a net income but a
net loss. Net loss right ok now I want to point out
something that's really important see up here in purple you've got the name of the company
the name of the statement and then it's dated for the month into December thirty one two
thousand ten when you prepare a financial statement I'm always going to ask you to prepare
in good form or proper form. So don't just give me this section here no
I want you to prepare it in good form give me the name of the company the name of the
statement and I want you to date it properly otherwise it's kind of worthless information
what if you just got this information the white part with the numbers.
What does that mean? Did you ever find a phone number that you
wrote on a post it note and you just wrote the phone number and there's no name next
to it and you're going this must have been important but I sure wish I would have wrote
the name next to it right. Again we are providing information for external
users. You list the name of the company the name
statement and you date it and you want to date it properly ok. Coming off the screen for a second Jake? Jacob? Jake? the Jakester? preferably not do you have a cell phone? Ok if I asked you what is your cell phone
expense and you told me a hundred and fifty dollars that is not real meaningful is it? Because do you pay a hundred and fifty dollars
a month for it? Do you pay a hundred and fifty dollars a quarter
for it if so that's a cheap that's an inexpensive one right? Do you pay a hundred and fifty dollars a week
for it that would be real expensive.
No when you ask about expenses you can't just
say my expense is this no you have to say my expense for the month is this, or if I
had a student who was working full time. Allie if you had a full time job and I say
what do you earn on your job and you say I earn twelve thousand dollars. Well I don't really know what that means do
I is that twelve thousand dollars a year if so that's not a real high paying job is it? Is it twelve thousand dollars a quarter if
so not bad? Is it twelve thousand dollars a month do you
earn twelve thousand a month Allie? Is it twelve thousand dollars a day are you
LeBron James where you earn twelve thousand dollars a minute right.
You see what I'm saying? When you talk about expenses or revenues you
can't just say here's the amount you have to say for the month or for the year ended
or for the quarter ended or for the week ended does that make sense? So going back to the statement let's say that
a student just dated it by putting December thirty first two thousand ten I would lovingly
take a point off on their test they need to put for the month ended December thirty first
of two thousand ten do you understand that? That's the income statement or the profit
and loss people know that one. Any question? Let's go to the next one. The next one is what, what's the next one
we prepare statement of equity and this is the one that students and people don't really
know.
The statement of equity shows the changes
in owners' equity for the period of time. This one is also prepared in good form isn't
it the name of the company the name of the statement and it's dated properly once again
for the statement of equity for the month ended December thirty one two thousand ten
you want to date it the same way as the income statement and this is real easy to see because
you can see the beginning of the month balance where's my pointer? You can see the beginning of the month balance
right here and you can see the ending of the month balance right here.
Now one of the reasons I gave you that quiz
in regards to how equity changes is because it comes in useful when we do the statement
of equity right. We can see that equity decreased with withdrawals
didn't it? Withdrawals caused equity to decrease investments
of owners by twenty thousand caused it to increase. Withdrawals caused it to decrease investments
by owners caused it to increase. Now you might say now wait a minute Krug I
remember that quiz you told us revenues caused equity to increase and expenses caused it
to decrease right.
Wasn't that the quiz and then you have something
causing it to increase that wasn't an answer on the quiz net income ok. I didn't lie to you what you weren't wrong
here's the scoop yes all revenues cause equity to increase yes all revenues cause equity
to increase and yes all expenses cause equity to decrease just like your quiz said, however,
on the financial statements we don't take the revenues over and add them we don't take
the expenses over and subtract them we just figure out the net number and take it over
are you with me? So looking back at the statement. We just take that net number we don't add
three thousand revenue and subtract eight hundred expenses we just take the net number
over to the statement of equity in this case twenty two hundred dollars. And since it's a net income it's added if
it's a net loss we would subtract it right? Does that make sense? Now another thing here what I want to point
out what is the beginning balance of capital of December one of two thousand ten it's zero
isn't it? I don't want you to think that the normal
beginning balance on your statement of equity is zero the only reason it's zero in this
instance is because this is the first month of business you understand? So it was zero at the beginning of the month
it's zero it's like if you just open up a checking account yes your first checking statement
the beginning balance would be zero right? But then if you had a checking statement Decembers
ending balance of cash in your checking account becomes January beginning balance right? And it's probably not going to be zero is
it? Hopefully not.
So looking back at this statement of equity
the beginning balance is zero only because this is the first month of business the ending
balance of capital is twenty one seven do you see how we would do a statement of equity
next month ended December thirty one two thousand eleven the beginning balance would twenty
one seven hundred ok. So don't be thinking the beginning balance
is always zero. Alright these are the first two statements
income statement, statement of equity do you see why we have to prepare the income statement
first? Cause the net income flows into the statement
of equity. That's a great question let's go back to the
screen, and let's just say in this instance the owner invested twenty thousand dollars
in the business, but then the owner also withdrew five hundred dollars owner's withdrawals are
not considered expenses that withdraws is not an expense so the owner compensates themselves
with withdrawals . Yes now again I'm telling the very basics right now as we get a little
further in accounting education I'll tell you some exceptions but I don't like to go
down those roads now for your purposes yes when a owner wants to compensate themselves
they do that through withdrawals and a withdrawals is not an expense that's why it doesn't show
up on the income statement.
What about salary expense. That was what I was trying to avoid and more
on that thanks a lot buddy. For your purposes I want to say no for your
purposes I want to say no at this level of your accounting education when the owner has
money it's a withdrawal now down the road you can probably tell yes there are some instances
there are some but for your purposes can we just say the owner compensates themselves
properly through withdraws not through salary expense ok.
When you ask these questions I can tell you're
thinking about these things and that's good. Alright we did the income statement we did
the statement of owner's equity what's the next one we prepare? Balance sheet now what is the ending balance
of capital on the statement of owner's equity twenty seven right. There it is right there right, where is my
pointer. There's that ending balance capital that flowed
from the statement of equity didn't it? So do you see why we have to do the balance
sheet after the statement of equity right? Well the balance sheet is called the balance
sheet because it shows that the accounting equation is in balance assets truly do equal
liabilities plus owner's equity and we can see that what are assets twenty six nine what's
your total liabilities and equity twenty six nine.
It gives the reader a really warm fuzzy to
see that those number are the same and that thing is balanced alright. Now make sure when you do your balance sheet
you need to put this total but I also want you to label them don't just have twenty six
nine down there on the bottom line I want you to say total assets twenty six nine and
then on the other side total liabilities and equity twenty six nine you with me? But you can see we list out our assets and
the ending balance the ending balances remember when we did the transaction analysis exercise
one eleven remember how we had the ending balances at the end of that exercise we had
the ending balances at the very bottom of that page that's what you could use to prepare
financial statements.
Let me see what else here this one is prepared
in proper form, what do I mean by proper form? I mean it has the name of the company it has
the name of the statement and it's dated properly now this one is dated a little bit different
isn't it? It doesn't say for the month ended it just
says December thirty first two thousand ten and that's proper if the student who prepared
this were to say for the month of ended December thirty first of two thousand ten on the test
I would lovingly taken off a point, and here's why.
Come off the screen for a second when we talk
about assets and liabilities we're talking about a point in time it's like a snap shot
for example nobody here works at a bank right? Does anybody here have a checking account? Well Jake if you called the bank and say how
much money do I have in my checking account they would say as of today you have eight
hundred and twelve dollars and four cents you wish ok. But they wouldn't say for the last month this
is what you had because it goes up and down doesn't it? Anybody here have a car loan Marlin if you
called up a bank how much is my auto loan payable they would say as of right now it
is twenty two hundred and sixteen cents. They wouldn't say for the last month this
is what it's been no it changes every day interest builds up you make payments its changing
all the time so when you're talking about liabilities or equity it's at a point in time
make sense? So the only way to date a balance sheet is
either say December thirty one two thousand ten or as of December thirty one two thousand
ten but don't be saying for the year ended or for the month ended because it wasn't those
same amounts during that whole period time I know that sounds gosh this guy's picky well
no not picky may be I am picky, but I want you to learn it's just as easy to learn it
the right way correct? And remember we are preparing this for other
people to look at we want it to make sense to them or else they won't help them make
better decisions correct? So the income statement and statement of equity
are going to be dated the same way in this case it was for the month of December thirty
one two thousand ten and the balance sheet 'boom at December thirty one two thousand
ten.
Anything else any questions looking at this
statement? Well get some practice in preparing those. Now the fourth financial statement that we're
going to prepare the fourth financial that we're going to prepare, or I shouldn't say
that the fourth financial statement that financial accountants prepare is the cash flow statement
or the statements of cash flows. Now let's look at this and appreciate its
beauty but you as a student in this class will not prepare this financial statement
I want you to know that this it's the fourth financial statement but you do not prepare
the statement of cash flows in this class it's beyond the scopes of this class.
Does anybody know that they are going to be
taking accounting two sometime well we will be learning it then ok. It's a little bit more difficult it basically
shows cash flows don't worry about it now. The only question I might ask you what's that
fourth financial statement it's the statement of cash flows. The one's that you will prepare and you will
prepare them in this order are the income statement the statement of owner's equity
the balance sheet boom, boom, boom they flow right into each other cool. Questions? I can already tell we're not going to have
time to go through that exercise one eight was that kind of tough? Exercise one eight? It wasn't as tough as exercise one eleven? Well we will go through exercise one eight
next time so if you haven't done it if you haven't done it I'm going to give you a little
bit of a hint ok and this is for you folks at home too we know it is exercise one eight
that we didn't go through right? We know that assets equals liabilities plus
owners' equity we know that right? And we also know that has to be true at the
beginning of the period and also at the end of the period right? And then whatever change occurs change being
the triangle delta signs that has to also be the case right? So what you can do is and I'm especially talking
about B and C on exercise one eight if they give you beginning numbers put those in here
figure out the other one if they give you ending numbers put those here if they give
you changes put those there it's kind of like a puzzle, because it has to work vertically
and it also has to work horizontally.
Does that make sense? So if you haven't done exercise one eight
you might use that formant ok. Alright let's talk about what your homework
is going to be. Ok what I want you to do for next time is. I want you to do quick study one twelve and
I guarantee you're going to have a test question like that.
That is giving you accounts and asking you
financial statements they go on that's very, very important to be able to do so quick study
one twelve. I'm not done not even near done I want you
to do not going to sign that one yet the other one
I will sign is exercise one fourteen one fifteen and one sixteen now exercise one fourteen
one fifteen and one sixteen are you preparing an income statement a statement of equity
and a balance sheet and let me see if there is anything seems like there was a note I
wanted to make on that yes there is ok. Let's take a look at this real quick this
is exercise one fourteen whoa you getting seasick there? See this owner investment seventy four hundred
ok let's just read through this on October first she organized real solutions and then
you're going to prepare financial statements on October thirty first you with me? Ok see this owner investment seventy four
thousand see that? Let's just assume that she made that on October
the second you with me? Because a lot time people are like I don't
know are you telling me that that's the beginning capital or is that an investment by the owners
during the month or what? Well let's just say she made that on October
the second of two thousand and do they give us a year? Let's just say on October second so what would
be the beginning balance of capital on October first zero you with me? Ok that's the one thing I wanted to clarify
there the other thing that you might do we have about twenty seconds left.
Is when you go through these the first thing
that I would recommend that you do is go through each one of these and write down what financial
statement it goes on and then as you put it on that financial statement circle it or put
a checkmark by it otherwise you're going to forget to put an account on a financial statement. You with me? Ok so I want to make sure here's the total
homework assignment right here I'll tell you what I'll go ahead and do I'll put exercise
one eight down again to remind us to do it if we haven't and to remind me to go over
it next time alright. You guys are doing great we'll see you next
time bye bye..