Accounting 1: Program #5 – “Financial Statements”

Hey there below we are again. If you, we are in the fifth lecture I believe
count the introductory one. Moving right along I desire you to observe that
we are really kind of just constructing we simply remain to construct our structures right. One of the very first things we learned is the
accounting equation what makes equity increases as well as what makes equity drops right. And also then we started learning purchase analysis
as well as now last lecture we began speaking about creating the economic declarations. Generally the earnings statement endurances of equity
Equilibrium sheet proper so we'' re just constructing on each other? The next lecture this is a great one as well
the next one is an extremely crucial lecture so be make certain you are right here for my face to facers
and also for you at home make sure watch that entire point you may also wish to see it more
than once, because we mosting likely to do some significant things in lecture number six.But let '

s care for lecture number five
initially alright so allow'' s undergo the homework real quick now one homework that I wear'' t think I had actually obtained to last time was exercise one eight is that right exercise one eight I had not reached. Allow me obtain a notepad out here so allow ' s. experience exercise one eight genuine quick.This kind of

test our understanding of the audit. formula. Okay workplace mart has assets equal to a hundred.
and twenty three thousand and liabilities equivalent to fifty 3 thousand at year end. What is the complete equity of office mart at.
year end what do you think? Seventy thousand now that one wasn'' t also difficult.
was it? Currently the following two and also I think I kind of pointed.
to this last lecture. We intend to concentrate on the bookkeeping formula.
assets equals owners plus responsibilities' ' equity correct. As well as we understand that needs to be real at the start.
of the year at the ending of the year so let'' s reviewed workout one eight B'and also allow ' s sort of. put in the info as we review it. At the start of the year Logan ' s company. possessions are 2 hundred thousand'so allow ' s placed two hundred thousand in there as well as its equity. is one fifty appropriate. Well we know liabilities don ' t we? What are the responsibilities fifty ok? Throughout the year properties boost seventy thousand. so there must be two seventy at the end and liabilities enhanced by thirty thousand so. obligations increase by thirty thousand is that proper? Fifty plus thirty is eighty so we currently know. owner ' s equity since that needs to equal'that plus that proper? What is owner ' s equity one ninety so does. that equal that plus that yup does that equal that plus that yup does that plus that equal. that does that plus that equivalent that as well as just how much did owners ' equity increase by then? Plus forty thousand does that equal that plus. that it ' s like a
challenge isn ' t it? Ok needs to work similar to this has to function like. this it ' s like a Sudoku problem right? Jake you can do these on a date with your. date you can do this all Friday night this would be fun wouldn ' t it? Do challenges together counting challenges that. be fantastic alright so.Questions on that one? Alright allow'' s do an additional one let me see if I have.
one more paper below. If I can simply lay that over, allow see. At the beginning of the year got on C on.
workout one eight C at the beginning of the year carrot companies obligations equal sixty.
thousand during the year properties increased by eighty thousand as well as at year end the properties.
equal one 8 thousand right? Ok well let'' s start filling up in what we understand.
what plus eighty equals one eighty this is a hundred right? Well that amounts to that plus what forty ok let'' s. see what else they tell us obligations lower by ten thousand dollars throughout the year remedy? Liabilities go down by ten thousand so.
sixty minus 10 equals what fifty? So what does proprietor'' s equity have to equal. one hundred as well as thirty forty plus what amounts to one thirty ninety ok well does equivalent unfavorable.
ten as well as ninety yeah it does doesn'' t it? Alright see how those work ok I generally have one.
or 2 of those on the examinations to see if you really understand Kara? Instead of putting an actual minus indicator.
you'' ll really do braces? Yeah, yeah, yeah I will do both so a great deal of.
times I will use the brackets to indicate minus or subtracted from cool? That is workout one 8 ok.Ok let'' s take a look after that at fast research one. twelve fast research study one twelve okey doke now I will certainly have a test concern similar to this I ensure.
I believe one more ability we want to have is to take a look at a account and also understand what financial.
declaration it takes place to consider an account and also look on what economic statement it goes.
on. Matter of fact when trainees come right into my.
workplace despite their accounting class they'' re taking. I always such as to do points to kind of analyze.
to see just how solid their structure remains in accountancy and also the first thing and also one of the initial point.
I'' ll ask of this allow me provide you some accounts inform me what monetary statement they'' re on'. and also if they don ' t understand exactly how to do this after that I understand we have work to do.
This is among those fundament things that. you wish to have ok.Quick study one twelve show which monetary.
Ok assets go on what? Assets on the equilibrium sheet. On fast research one twelve profits goes on.
what? earnings statement what does the obligations.
go on? Annual report tools takes place the equilibrium.
Costs goes on the income declaration. Total liabilities and also equity balance sheet. Cash money from running tasks really goes.
on the capital statement I don'' t expect you to recognize that. The net increase and the decline in cash.
Goes on the cash money flow statement I'' m not so concerned that you understand concerning that ok.What if one of

the options would'' ve been ending. Finishing balance of owner'' s funding really.
The finishing equilibrium of owner'' s funding really. Declaration of equity and also the equilibrium sheet.
Prepare them in that order, and also that'' s what we ' re going to do now. Just how did you people do on workout one fourteen. one fifteen one sixteen cool? Here'' s what I desire to do. this is kind of a streamlined this is most likely the most easiest example that you'' ll do and also. I ' ll tell you why here in a second.'But below is why right here ' s kind of the procedure. When they have a problem like this.Is to go via each of these items or accounts, I encourage students to make use of. prior to you start doing the economic declarations and also decide what financial declaration they go. on. So allow ' s take a look below money gets on the equilibrium. sheet is that right? as is accounts receivable products land workplace. devices accounts payable every one of those
or on that annual report correct? Because, currently see they made it very easy for you. they kind of organized whatever with each other.
We ' re begin working with one today that ' s not. as simple, but they organized whatever with each other as for what economic declaration it goes. on.Now proprietor ' s financial investment and also allow ' s assume that. those were made on the 2nd or the third of October that would go on what? Declaration of owner ' s equity what regarding the. cash money withdrawals by proprietor? Declaration of owner ' s equity deal with? Consulting costs'gained that ' s another sort. of terms for'earnings that goes on the income statement as does leasing cost, incomes. cost, telephone expenditure, various expense those all take place the income statement. ok. Now as we prepare those economic statements.
The income statement and also as you use these.
Allow ' s take a look at workout one fourteen. Alright ok so were going to utilize which ones. As well as the earnings statement looks like this ok.
You have the name of the business the name. Finished October thirty one currently they didn ' t give us a year or you would have put that.
Now they have their revenues and afterwards they. have their expenses typical inquiry is well what
if my'expenditures remain in a different order. that ' s entirely fine you understand they undoubtedly did this from biggest expense down to smallest. expenditure which is a typical means you ' ll see a revenue statement yet you can do it you can.

list those nonetheless you want ok.Now I wish to see to it I wish to make certain. that you noted those expenses I don ' t desire to simply see that for your earnings statement.
those number right there no I desire the details as far as what those expenses are that gives.
the reader a great deal more information so they can make their choices correct? Alright any type of questions on that your own might.
look a little different like I stated that'' s ok any kind of inquiry on that particular? Sort of a regulation of thumb is'commonly you ' ll placed. a dollar sign at the really leading and also a dollar indicator at the very lower ok, but'you wear ' t. need to place dollar indications everywhere right here they did due to the fact that it was the top of this column.
ok. Any kind of questions on the revenue declaration? Ok now allow'' s have a look at the declaration. If we can obtain them both on right here, of equity let ' s see. Ok and also where do we get that earnings? It flows down doesn'' t it; it streams below. the declaration of equity which is why we have to prepare them in this order. Ok alright the beginning equilibrium of capital.
was absolutely no we added investments by owner of seventy four thousand which was made on either.
October second or October third I can'' t bear in mind on which I told you we include the take-home pay.
you know this subtotal right here I assume is sort of not a real rewarding subtotal.
if you didn'' t have that'that ' s great then you deduct your withdrawals by the owner and also you.
obtain in king resources at October thirty initial is this prepared in correct kind or in great.
form indeed name of the statement name of the company and also its outdated correctly it will always.
be dated similarly between the statement of equity and also the earnings statement.Ok so exists any concerns on that particular any inquiry. on those like I stated I assure you you ' ll be doing this on tests ok on the first examination. which is over chapters on and also two.
Ok what ' s the next one we prepare'the equilibrium. sheet, and what ' s the ending equilibrium of funding its seventy 5 seven fifty if you look over.
right here right. The finishing equilibrium is seventy five 7 fifty.
Here at the base as well as that'' s going to stream over to your balance sheet. There it is right there whoops allow me obtain.
it right initially there it is right there alright take an appearance at that I'' ll allow you examine. your number right there after that I ' ll have some comment about it. Ok first thing you consider with an equilibrium.
sheet is you wish to see to it it equilibriums do the complete assets equal total responsibilities.
plus the equity? Yes currently make certain you complete those and make.
sure you identify them I wear'' t like numbers that wear ' t have a label next
to them particularly. the one at the extremely bottom so make certain you claim total properties eighty three two fifty total amount.
responsibilities as well as equity eight 3 two fifty.Is it prepared

in proper kind or excellent form.
indeed the name of the firm the name of the declaration as well as its dated correctly now this.
One is dated you can either state as of October thirty first or simply October thirty.
but do not state for the month finishing October thirty initially an equilibrium sheet is a breeze shot.
in time fix? We want to make certain that it'' s dated correctly.
What occurs if your balance sheet doesn'' t. t balance? Now when you individuals take the test and when I.
ask you to prepare these three 3 economic Declarations'' ve had students go absolutely bananas because.
their equilibrium sheet did not balance.I ' m a quite good'guy I suggest if you prepared. it if you did a rather great job and you maybe just made a math error in the process but it ' s. ready nicely and also you did most points correct you ' re going to get partial credit history but please.
put on'' t resemble some pupils in the past I ' ve had had students pend half an hour on their.
financial statements on their examination because they can not since they were getting a.
little obsessive it doesn'' t equilibrium therefore they were ignoring the rest of their examinations.
as well as due to the fact that they invested thirty minutes I'' ve reached locate why it didn'' t balance right kick back. breath deep do the most effective task you can do the rest of your examination if you obtained time you can.
come try to find it once more, yet there is partial credit report here ok, because a great deal of times my.
pupils will on the test they'' ll thumb back and also do the troubles first the monetary declarations.
they'' ll do that first before they do any of the multiple selection or anything else.Any inquiries

on that particular? Great. I think that was all the research I assigned.
is that proper? Ok so were going to speak about a couple of other.
things today and after that were going to do a little of job right here in class on some things today,.
One thing I desire to go back with today is remember when and also we spoke about the earnings.
recognition concept ok. Let'' s take an appearance at the display actual quick.
ok that we spoke about there'' s principles and assumptions of bookkeeping for which all.
the policies are built on proper? And also we spoke concerning the revenue recognition.
When it is, principle which is very vital just to repeat we acknowledge income.
made when is it gained? When the service or product has actually been delivered.
to the consumer not necessarily when the money adjustments hand fix? So allow'' s simply do a fast instance as well as I desire
. to introduce you to a new account.Let ' s state our

buddy Jake below allowed ' s return. to the'example let
' s say he ' s the guy that mows my yard let'' s claim that I actually allow '
s. say yeah allow'' s check out the point of view of Jake. not from me but the perspective of Jake and his bookkeeping books. Allow'' s state hey can you mow my grass next
. week and also he states yeah that'' s great and also its fifty dollars appropriate to trim my funding as well as he.
goes yeah that'' s appropriate allow me offer you the fifty bucks now but you wear'' t demand to trim.
it till like following Thursday he says that'' s great I'put on ' t understand if I ' m visiting you. following week so allow me just give you the fifty now so I offer him the fifty buck expense. Well on Jakes accountancy records as well as if we.
were doing the purchase evaluation just how would certainly we videotape that? Well I'' ll reveal you we would state we would certainly say. cash for Jake rose by fifty and after that we would certainly have an account called unearned profits.
that will additionally go up by fifty and also unearned profits is a liability.Sometimes people think that unearned earnings. is a revenue since it has words profits in it however its not. Unearned earnings is a responsibility account and. therefore it opts for the various other obligations on which monetary declaration where do responsibilities. go annual report unearned earnings is a responsibility as well as it goes the equilibrium sheet so taking a. appearance back at this Jake when I provide you fifty bucks
and also you ' re monitoring this in. your records your cash money rises by fifty an your unearned profits rises by fifty. Well Thursday comes as well as you cut my yard well. a purchase that you will make then is your earnings will certainly rise by fifty
bucks. as quickly as you ' re done cutting my lawn.And unearned profits that obligation now goes.
down due to the fact that you'satisfied that.

Does that make good sense? And obviously me as the customer
I wear ' t recognize. your making this entry I really don ' t care, but also for your books taking another take a look at. this when you obtained the money, money rose by fifty unearned revenue a liability when you. provided the service unearned earnings dropped a liability was reduced and profits. you can book it as income at that point cool. Ok let ' s speak about these various other concepts. what regarding the expense concept? Well the expense concept is this that implies.
Because that is unbiased, that you base your accounting information on real prices. let me give you an instance. Marlin let ' s say that you had a service as well as. you bought an utilized truck for it off of Craig ' s listing as well as I
stated just how much did you buy the vehicle. for as well as you say I purchased it for eight thousand bucks cash money and also I stated 8 thousand cash. is what you spent for it that ' s good deal.And you state right here ' s the attractive part Dave. I took it to my'bro who works at a used car lot he knows automobiles he knows what they ' re. worth he knows trucks he understands what
' s they ' re worth he stated this point is worth at least.

thirteen thousand I obtained a bargain you recognize I looked it up on the bluebook value it stated.
it'' s twelve thousand 9 hundred as well as I got it for 8 I got a deal on this point, this.
thing deserves 5 thousand even more than what I paid for it ok well that'' s all great and.
great however when you videotape that in your books it goes on your publications at eight thousand, because.
that'' s what you paid for it and also if I check out your cancelled check it'' s mosting likely to state. eight thousand bucks right? We can'' t simply put assets on what we feel like.
Their worth since that would be rather easy to distort wouldn'' t it? Ok so we put what we spent for it that ' s the. price concept I put on ' t desire to concentrate way too much on this this is even more of a phase 3.
principle concept but this speak about how we'' re going to match the expenditures to the profits. that they aid produce allow'' s simply wait till chapter three to discuss matching concept.
I won'' t be asking that on the first test.What about the complete disclosure principle a. company is needed to report the details behind the monetary declarations that would certainly. Well as you thumb through it
you ' re going. Different accounts then go look at those monetary
statements and it makes a lot more sense?However mosting likely to this financial declaration I'' m. sorry these ah mosting likely to the concept the full disclosure concept that simply states.
that a company is required to report those information ok there not the monetary statement.
themselves yet their the notes to the financial statements.Does that make good sense? Okay let ' s go to the next web page of concepts. there ' s also something called a going concerned assumption currently this the assumption that the.
organization is going to proceed operating. Instead of being liquidated or closed or.
If you did believe it was going to be closed or sold off in, marketed in the close to term currently.
the brief term it would certainly need to say so prominently in the notes that I just revealed you.That ' s pretty essential isn ' t it? Ok yet if you put on'' t see that you can presume.
it'' s going to continue taking place. Marlin? Great concern great question the ones that.
you saw are yearly ok but most firms prepare monthlies for their own use but the annual.
report is undoubtedly simply twelve months great concern. Any type of various other questions? Wonderful question that was obviously a big.
company wasn'' t it? If all firms have, as well as huge you asked.
to do this or simply big ones.All companies

do currently you can also here'' s
the. offer if you are an openly traded company like Study in Movement that'' s their yearly.
report they send that to the investors or if you'' re considering purchasing it.
You can be a tiny firm like let'' s. go back to Jake allow ' s claim he has a landscaping organization. Well you'' re not openly traded you'' re
not. Let'' s claim that you have a lending with the
the demands of that car loan is that you have to supply periodic economic statements.
When you provide those yes you have to have the notes, either every year or every quarter and.
behind them too it may look as vivid it might not look as slick, it might not have.
rather images, however you have to prepare the same thing.Now if you '

re simply a company on your own.
allows say Jessica has her own organization no financial institution has actually provided her cash you recognize it'' s simply. her'. She ' ll possibly intend to prepare those financial
. statements and she'' ll possibly need to have stuff like that for tax obligation purposes, yet after that.
the needs are a bit less alright. So but yeah when I was an exterior auditor.
I would aid do those economic statements as well as help write those notes and also a great deal of those.
Any kind of various other questions? Ok allowed'' s struck on these last ones real fast.
If it'' s the United States it will certainly be the. U.S buck if it ' s in Europe it'will be the euro, if it ' s in Japan it will certainly be the yen.Your monetary statements will be in some. That specifies an organization is accounted for individually.
from other companies entities including its owner. Jake your landscaping company that you.
have it maintain track of it separately from your personal life as well as I assume we discussed.
It'' s a big mess if you get it all blended up.
ok. And afterwards the last point is the moment duration.
assumption. That mentions that the life of a business can.
be split right into amount of time such as months or years or quarters as well as all those kind of.
points we can kind of divide points up appropriately, and also we'' ll talk more concerning that in phase. three, but that'' s the moment duration presumption ok any inquiries on that? Yes Kara “” On the company entity component of it.
allows claim your business checking accounts low and also you transfer cash from like your individual.
what would that be considered and also just how would you pay would certainly you have to pay yourself back?”” That'' s an excellent inquiry what you ' re saying. if your service is short on cash, but you ' ve obtained some individual cash you intend to put it.
right into it that'' s just an additional financial investment by the proprietor right into business you recognize that. investment by the proprietor is among those things that boosts proprietor'' s resources or equity that
. can take place not simply at the very start of the service but at any moment and also you could.
deal with that as one or 2 means however your most likely going to treat that as an investment by the.
owner right into business as well as after that of training course you can take out if you begin getting a lot.
of money in there you can take out cash from business after that it will decrease capital.
and equity so ok.Good alright

allow me look into my notes real.
quick see if we discussed what I intend to obtain with. Alright what I am going to do now is. I am mosting likely to Jake will you do me a favor.
and also hand one of these out to each person right here we are going to work with something this is.
a monetary prep work I'' m going to place it on the screen for you. This is for valentine tree cutting valentine.
tree cutting and also what I want you to do is prepare the 3 financial statements for.
valentine tree trimming ok. Now allow me offer you a few check figures on.
this we'' re mosting likely to begin on it throughout class, yet I don'' t believe well have time to
do the. entire point, but let me offer you some inspect number the take-home pay is going to be 7.
thousand as well as forty bucks ok. The ending funding on the statement of equity.
is mosting likely to be thirty five forty and also on the annual report the total assets will certainly be thirty.
What ' s various about my listing of accounts? Yeah “its indexed I didn ' t team them. In alphabetical order so you really require to go through you really require to go through.
And also after that look now wear ' t obtain started yet individuals. Currently you folks at house while watching this.
you'' ll see valentine tree trimming its called something like that so you to publish these.
Any kind of concern prior to we turn the songs on and. Any kind of questions? Ok the initial point you desire to do is go via.
So allow'' s play that snazzy jazzy songs and also.
allow'' s proceed as well as service this for a while. Wait concern prior to we go “” is unearned revenue.
on the income statement or is that a liability”” unearned is that account that we just spoke.
about and what is that account is unearned profits? It'' s a liability it goes on
the annual report,. Where do individuals constantly make the error on the test and placed it on they put it on they.
Ok allowed'' s just look at the earnings statement. Below ' s the income statement can you guys see. Do that I guarantee if you wear ' t do that you ' re.
what statement these points take place and after that circle them or check them off as you go usage.
them ok.Now someone asked on this set they didn'' t. see and also financial investment by owner there ' s not constantly mosting likely to be financial investment by proprietor every month,.
but the leading cellular lining of declaration of equity will certainly be that balance of resources ok will be.
that balance of resources at seventy one thirteen of twenty 8 thousand. So what I desire you to do exists any various other.
Regarding the revenue statement? On the directions it just states August two.
thousand thirteen should we place just that or should we place the difference? That'' s an excellent inquiry a great deal of times points.
will certainly be stated like that its recognized it said august thirty one two thousand thirteen.
If you didn'' t that ' s fine however I said for the month finished august thirty one excellent point.Any other concern? Let me offer you your homework right here is the. research I desire you to do
I desire you to end up the valentine give out I want you to do fast. research one point 6 and afterwards I want you to check out return on assets ROA its on web page. twenty two and twenty three in your book as well as do exercise one eighteen ok each phase has. a ratio at the end of it as well as well speak about those see to it for next lecture which is. a very essential lecture you have your PowerPoint ' s for phase 2 ok. That you have your PowerPoint'' s for phase. two is everyone below enrolled in attach ok excellent are you individuals in the house enrolled in. attach yet. Due to the fact that next course period were mosting likely to speak
. a little more about the connect assignments.
Alright any kind of concerns? Got your homework? Good class period next course period is an actual. essential one well see you bye-bye.

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