Accounting 1: Program #5 – “Financial Statements”

Hello below we are once more. We are in the fifth lecture I assume if you
matter the introduction one. Relocating right along I want you to discover that
we are really type of just developing we just remain to develop our foundations right. One of the initial points we discovered is the
accounting equation what makes equity goes up as well as what makes equity decreases right. And also then we began finding out purchase analysis
and also currently last lecture we began talking concerning developing the monetary declarations. Mainly the revenue declaration stamen of equity
Equilibrium sheet right so we'' re just developing on each various other? The following lecture this is a good one as well however
the next one is a very essential lecture so be see to it you are right here for my face to facers
and also for you in your home make certain watch that entire thing you might also desire to enjoy it a lot more
than as soon as, due to the fact that we going to do some significant things in lecture number six.But allow '

s take care of lecture number five
Let me obtain an item of paper out below so allow ' s. go with workout one 8 genuine fast. This kind of test our knowledge of the accounting.
formula. Okay workplace mart has possessions equivalent to a hundred.
and twenty three thousand and also responsibilities equivalent to fifty three thousand at year end. What is the total equity of office mart at.
year end what do you think? Seventy thousand currently that one wasn'' t as well hard.
was it? Currently the next 2 as well as I believe I type of pointed.
to this last lecture.We want to concentrate on the bookkeeping formula. possessions equates to responsibilities
plus proprietors ' equity appropriate. And we understand that needs to be true at the start. of the year at the ending of the year so allow ' s read exercise one eight B and also let'' s kind of. placed in the information as we review it. At the start of the year Logan'' s firm. assets are two hundred thousand'so let ' s placed 2 hundred thousand in there as well as its equity. is one fifty proper. Well we understand responsibilities don ' t we? What are the responsibilities fifty ok? Throughout the year assets increase seventy thousand. There should be two seventy at the end and responsibilities raised by thirty thousand so. obligations rise by thirty thousand is that right? Fifty plus thirty is eighty so we currently understand. owner ' s equity because that needs to amount to'that plus that proper? So what is proprietor ' s equity one ninety so does. that equal that plus that yup does that equivalent that plus that yup does that plus that equivalent. that does that plus that equivalent that as well as just how much did proprietors ' equity rise by after that? Plus forty thousand does that equal that plus. that it ' s like a
puzzle isn ' t it? Ok needs to work similar to this has to function like. this it ' s like a Sudoku puzzle right? Jake you can do these on a day with your. day you can do this all Friday evening this would certainly be enjoyable wouldn ' t it? Do puzzles with each other counting puzzles that. be great ok so.Questions on that particular one? Ok let'' s do an additional one let me see if I have.
an additional piece of paper below. Allow see if I can just lay that over. At the start of the year got on C on.
exercise one 8 C at the beginning of the year carrot firms liabilities equal sixty.
thousand throughout the year possessions boosted by eighty thousand and also at year end the assets.
Equal one 8 thousand? Ok well allow'' s start filling up in what we understand.
What plus eighty amounts to one eighty this is a hundred? Well that equals that plus what forty ok allowed'' s. see what else they inform us obligations reduce by ten thousand dollars throughout the year remedy? Responsibilities go down by 10 thousand so.
sixty minus ten equals what fifty? So what does proprietor'' s equity have to equal. one hundred and thirty forty plus what equals one thirty ninety ok well does equivalent negative.
10 as well as ninety yeah it does doesn'' t it? Alright see how those work ok I generally have one.
or two of those on the examinations to see if you truly understand Kara? So rather than putting a real minus indication.
you'' ll really do brackets? Yeah, yeah, yeah I will certainly do both so a lot of.
times I will utilize the brackets to suggest minus or deducted from cool? That is exercise one 8 ok.Ok let'' s have a look then at quick research one. twelve quick research one twelve okey doke currently I will certainly have an examination concern similar to this I guarantee.
I think another ability we wish to have is to check out a account and also recognize what financial.
declaration it takes place to take a look at an account and view on what economic statement it goes.
on. When pupils come into my, matter of truth.
office no matter their accountancy course they'' re taking. I always such as to do things to sort of evaluate.
to see exactly how solid their structure remains in bookkeeping and also the initial point and among the first point.
I'' ll ask of this let me give you some accounts tell me what monetary declaration they'' re on'. and also if they don ' t know how to do this after that I know we have work to do.This is just one of those fundament things that.
you wish to have ok. Quick study one twelve suggest which economic.
Alright assets go on what? Properties on the equilibrium sheet. On quick research study one twelve incomes goes on.
what? income statement what does the liabilities.
go on? Annual report devices takes place the equilibrium.
sheet. Withdrawals? Statements of proprietor'' s equity, statement of'. owner ' s equity for withdrawals. Costs takes place the earnings declaration. Total responsibilities and equity annual report. Cash money from running activities actually goes.
Goes on the money flow declaration I ' m not so concerned that you know regarding that ok. What if one of the choices would'' ve been finishing. Finishing equilibrium of proprietor'' s capital in fact.
The finishing equilibrium of proprietor'' s funding in fact. Statement of equity as well as the equilibrium sheet.
Prepare them in that order, and also that'' s what we ' re going to do now. Below'' s what I desire to do. Below is why here ' s kind of the procedure.
We ' re begin servicing one today that ' s not. as very easy, however they grouped whatever together as for what financial statement it goes. on. Currently owner ' s financial investment and allow ' s think that. those were made on the second or the third of October that would certainly take place what? Declaration of owner ' s equity what about the. cash withdrawals by owner? Statement of proprietor ' s equity correct? Consulting charges'gained that ' s another sort. of terms for'profits that takes place the revenue declaration as does leasing expense, wages. cost, telephone expense, assorted expenditure those all go on the revenue statement. ok.Now as we prepare those monetary statements.
The income declaration and as you utilize these.
So let ' s have a look at workout one fourteen. the answer ok. Alright ok so were mosting likely to utilize which ones. on the income statement? That one that that that which. one proper? And the earnings declaration looks like this ok. That'' s what the income statement'resembles. I ' m mosting likely to make some comments in yet I first want you to take a look at it see if you'' re. Numbers are. Okay let me make some remarks regarding it. of all its prepared in appropriate type or great kind isn ' t it.You have the name of the business the name. of the declaration as well as it ' s dated effectively don ' t just put October thirty one put for the month. finished October thirty one now they didn ' t offer us a year or you would certainly have placed that also.
Now they have their earnings as well as then they.
Now I want to make sure I want to make sure. Alright any type of concerns on that yours might. Kind of a regulation of'thumb is
often frequently ' ll put.
ok.Any inquiries on the revenue statement? Ok currently allow'' s have a look at the declaration. If we can obtain them both on right here, of equity let ' s see. Ok as well as where do we obtain that earnings? It flows down doesn'' t it; it moves below. the declaration of equity which is why we need to prepare them in this order. Ok alright the starting balance of funding.
was zero we added financial investments by proprietor of seventy four thousand which was made on either.
October 2nd or October third I can'' t keep in mind on which I informed you we include the earnings.
you recognize this subtotal right here I believe is kind of not a real beneficial subtotal.
if you didn'' t have that'that ' s fine then you deduct your withdrawals by the proprietor and you.
enter king resources at October thirty initial is this prepared in correct form or in excellent.
type of course name of the statement name of the firm as well as its dated properly it will always.
be dated the exact same method between the statement of equity and also the earnings statement.Ok so is there any kind of inquiries on that any question. on those like I said I guarantee you you ' ll be doing this on examinations ok on the initial examination. which mores than chapters on and two.
Ok what ' s the following one we prepare'the balance. sheet, and also what ' s the ending equilibrium of resources its seventy five 7 fifty if you look into.
here right. The finishing equilibrium is seventy 5 seven fifty.
Here at the base and that'' s going to stream over to your equilibrium sheet. There it is right there whoops allow me get.
it straight initially there it is right there ok have a look at that I'' ll let you inspect. your number right there after that I ' ll have some comment concerning it. Okay initial thing you consider with a balance.
sheet is you intend to make certain it balances do the complete properties equivalent overall liabilities.
plus the equity? Of course currently see to it you complete those and make.
sure you identify them I put on'' t like numbers that put on ' t have a tag next
to them particularly. the one at the extremely bottom so make certain you state complete possessions eighty three two fifty overall.
liabilities and equity eight 3 2 fifty.Is it prepared

in correct type or good kind.
of course the name of the company the name of the declaration as well as its dated correctly now this.
one is dated you can either say since October thirty very first or just October thirty initially.
yet do not state for the month ending October thirty first an equilibrium sheet is a snap shot.
in time remedy? We desire to make sure that it'' s dated correctly.
to show that. What happens if your equilibrium sheet doesn'' t. t balance? You did a booboo slipped up right? Now when you people take the examination and when I.
ask you to prepare these 3 financial declarations I'' ve had trainees go definitely bananas because.
their equilibrium sheet did not balance. I'' m a quite good guy I mean if you prepared.
it if you did a pretty great job and also you possibly simply made a math mistake along the means but it'' s. prepared nicely and you did most points remedy you'' re going to get partial debt however please.
don'' t be like some trainees in the past I ' ve had actually had pupils pend thirty mins on their.
financial declarations on their examination since they might not because they were obtaining a.
little compulsive it doesn'' t equilibrium as well as so they were ignoring the remainder of their examinations.
as well as because they spent half an hour I'' ve reached discover why it didn'' t balance right relax. If you got time you can, breath deep do the ideal work you can do the remainder of your test.
come seek it again, however there is partial credit scores right here ok, because a great deal of times my.
trainees will on the examination they'' ll thumb back and do the troubles initially the economic declarations.
they'' ll do that first prior to they do any one of the multiple selection or anything else.Any concerns

on that? Great. I think that was all the homework I assigned.
is that right? Ok so were mosting likely to talk regarding a few other.
points today and after that were going to do a little bit of work below in class on some points today,.
One thing I want to go back via today is remember when and we spoke regarding the income.
recognition concept ok. Allow'' s have a look at the screen actual quick.
ok that we spoke about there'' s concepts as well as assumptions of bookkeeping for which all.
the guidelines are built on correct? And also we discussed the revenue acknowledgment.
When it is, concept which is extremely crucial just to repeat we acknowledge income.
made when is it made? When the product and services has actually been provided.
Let'' s just do a fast example as well as I desire
. Let'' s say our friend Jake right here allowed'' s go back.
it till like next Thursday he says that'' s fine I'don ' t know if I ' m visiting you. following week so let me simply provide you the fifty currently so I offer him the fifty buck costs. Well on Jakes accounting documents and also if we.
were doing the purchase evaluation how would certainly we tape that? Well I'' ll reveal you we would certainly claim we would certainly state. cash for Jake went up by fifty and afterwards we would certainly have an account called unearned earnings.
Unearned profits is a liability account and. Well Thursday comes as well as you cut my yard well.
down since you'satisfied that.

Does that make feeling? As well as certainly me as the customer
I don ' t recognize. your making this access I really wear ' t treatment, but also for your books taking another take a look at. this when you obtained the money, cash went up by fifty unearned revenue a responsibility when you. given the solution unearned revenue decreased an obligation was lowered and also earnings. you can schedule it as earnings then cool.Ok allow ' s discuss these various other concepts. what regarding the price principle? Well the price concept is this that suggests. Because that is objective, that you base your bookkeeping info on real prices. let me give you an example. Marlin allowed ' s claim that you had a service and also. you bought a used vehicle for it off of Craig ' s checklist as well as I stated how much did you buy'the vehicle. for and also you say I got it for 8 thousand bucks cash money and also I said 8 thousand cash. is what you spent for it that ' s bargain.
And you state here ' s the attractive component Dave. I took it to my bro that operates at a made use of car whole lot he recognizes cars and trucks he understands what they'' re. worth he understands vehicles he understands what ' s they
' re worth he stated this thing deserves a minimum of. thirteen thousand I obtained a deal you recognize I looked it up on the bluebook worth it stated'. it ' s twelve thousand 9 hundred and also I got it for 8 I obtained a bargain on this point, this. point deserves five thousand more than what'I paid for it ok well that ' s all great and also. great but when you record that in your books it takes place your books at 8 thousand, because. that ' s what you spent for it and if I look at your terminated check it ' s going to claim. Eight thousand dollars? We'can ' t simply placed assets on what we seem like. their worth because that would be rather easy to distort wouldn ' t it right? Ok so we placed what we spent for it that ' s the. price principle I'wear ' t desire to focus also much on this this is even more of a phase 3. principle concept yet this speak about how we ' re mosting likely to match the expenses to the earnings.
that they assist produce let ' s simply wait till'phase 3 to talk about matching principle.
I won ' t be asking that on the very first test.What concerning the full disclosure principle a. company is called for
to report the details behind the financial statements declarations would. Well as you thumb through it you ' re going. Well those are called the notes to the monetary.
I really claim prior to you look at the monetary declarations look via those notes look via.
Various accounts then go appearance at those monetary declarations and also it makes a whole lot even more feeling? Cause you obtained some context to place it in does.
that make feeling?Going to this monetary statement I'' m. sorry these ah going to the concept the full disclosure concept that just mentions.
that a firm is needed to report those details ok there not the economic statement.
themselves however their the notes to the economic statements.Does that make good sense? Ok let ' s go to the next web page of principles. there ' s also something called a going concerned assumption currently this the presumption that the.
business is mosting likely to proceed running. In contrast to being liquidated or shut or.
offered in the close to term now if you did believe it was mosting likely to be shut or sold off in.
the short term it would certainly have to say so plainly in the notes that I simply revealed you. That'' s rather important isn ' t it? Ok however if you wear ' t see that you can presume. it ' s mosting likely to proceed going on.
Marlin? Excellent concern terrific inquiry the ones that. you saw are annual ok however most business prepare monthlies for their very own usage
but the annual. report is certainly just twelve months good inquiry. Any kind of various other inquiries? Wonderful concern that was undoubtedly a large.
business wasn'' t it? As well as large you asked if all business have.
to do this or simply big ones.All companies

do now you can also below'' s
the. bargain if you are a publicly traded firm like Research study in Motion that'' s their annual.
report they send that to the shareholders or if you'' re believing regarding buying it.
they'' ll send it to you. You can be a little business like allow'' s. go back to Jake let ' s state he has a landscape design business. Well you'' re not openly traded you'' re
not. Buying stock their not following you on CNN financial? Allow'' s say that you have a finance with the
. financial institution a bank aided you start your organization by providing you a funding a great deal of times one of.
the demands of that funding is that you need to supply routine financial statements.
either every year or every quarter as well as when you provide those yes you have to have the notes.
behind them too it might look as vibrant it might not look as slick, it may not have.
Now if you'' re just a company on your own
statements and also she'' ll possibly have to have stuff like that for tax functions, yet then.
the demands are a bit less okay. However yep when I was an exterior auditor.
I would assist do those economic statements as well as aid create those notes and also a lot of those.
points so good inquiry. Any kind of other inquiries? Ok allowed'' s struck on these last ones real quick. the monetary unit presumption. This is the assumption that says deals.
If it'' s the United States it will certainly be the. U.S dollar if it ' s in Europe it'will certainly be the euro, if it ' s in Japan it will be the yen.Your financial statements will certainly be in some. That states a company is accounted for separately.
from various other companies entities including its owner. So Jake your landscaping business that you.
have it track it independently from your personal life and also I think we talked about.
Make sense? It'' s a large mess if you get it all blended up.
ok. And afterwards the last point is the moment period.
presumption. That states that the life of a company can.
be split into amount of time such as months or years or quarters as well as all those type of.
things we can kind of divide points up correctly, and we'' ll talk much more concerning that in chapter. three, however that'' s the moment period assumption ok any type of questions on that? Yes Kara “” On the company entity part of it.
lets claim your business checking accounts low as well as you transfer money from like your personal.
what would that be taken into consideration and how would certainly you pay would certainly you have to pay yourself back?”” That'' s an excellent inquiry what you ' re saying. But you ' ve got some personal cash you desire to put it if your organization is low on cash.
into it that'' s simply an additional investment by the owner into the service you understand that. investment by the owner is just one of those points that increases owner'' s funding or equity that
. can happen not simply at the actual beginning of the company but at any moment and you could.
deal with that as one or two means but your probably going to treat that as a financial investment by the.
If you begin obtaining a great deal, proprietor right into the organization as well as after that of program you can withdraw.
of cash money in there you can take out cash from the company after that it will lower funding.
and equity so ok.Good alright

allow me look over my notes real.
If we gone over what I desire to obtain through, fast see. Alright what I am mosting likely to do currently is. I am mosting likely to Jake will certainly you do me a support.
as well as hand one of these bent on everyone right here we are going to work on something this is.
an economic preparation I'' m going to place it on the screen for you. This is for valentine tree trimming valentine.
tree trimming as well as what I desire you to do is prepare the three monetary statements for.
valentine tree trimming ok. Now allow me give you a few check figures on.
this we'' re mosting likely to begin on it throughout class, but I don'' t think well have time to
do the. whole thing, yet allow me give you some examine number the earnings is going to be seven.
thousand and forty bucks ok.The ending funding on the statement of equity.
is going to be thirty five forty and also on the annual report the total assets will certainly be thirty.
four oh twenty. Those are all buck figures ok currently you'' re. going to discover something various on this valentine tree trimming have a look at the.
list of accounts what is various? What'' s different regarding my checklist of accounts? “” They'' re all blended up.”” Yeah its alphabetical I didn'' t team them
. completely by what declaration they take place ok like the book did I just provided to you.
In alphabetical order so you really need to go via you really need to go through.
and determine what monetary statement it goes on.And after that look currently put on'' t begin yet individuals.
as well as then as you use these accounts put a check mark by it or I guarantee it you'' re going. to miss one so circle it or put a check mark as you do it ok. Now you folks in your home while enjoying this.
you have this work sheet ok this in the lessons tab below the phase under chapter one.
you'' ll see valentine tree trimming its called something like that so you to print these.
things out and also have them prepared for class. Reason were mosting likely to service this in course.
a little while that classy jazzy JCCC songs plays, as well as you individuals at residence work with.
it as well lets a minimum of make it through the income statement. Any kind of inquiry before we transform the music on and.
transform the audio off? Any kind of questions? Ok the initial point you wish to do is go through.
that checklist of accounts decide what declaration it goes on and also after that start preparing your earnings.
declaration after that your declaration of equity and afterwards your equilibrium sheet.This is a passed examination inquiry this exact. concern was on an examination so this is going to be a good sign on what you need to do.
on the examination. So let'' s play that trendy jazzy songs as well as.
allow'' s proceed as well as deal with this for some time. Wait question before we go “” is unearned earnings.
on the revenue declaration or is that a liability”” unearned is that account that we simply talked.
around as well as what is that account is unearned income? It'' s an obligation it goes on
the equilibrium sheet,. Where do individuals always make the error on the test and placed it on they put it on they.
Ok let'' s just look at the incomes statement. Below ' s the income declaration can you guys see. Do that I assure if you put on ' t do that you ' re.
what statement these points take place and after that circle them or examine them off as you go use.
them ok.Now somebody asked on this set they didn'' t. see as well as financial investment by proprietor there ' s not constantly going to be investment by owner each month,.
but the leading lining of statement of equity will certainly be that equilibrium of funding ok will certainly be.
that equilibrium of resources at seventy one thirteen of twenty eight thousand. What I desire you to do is there any type of various other.
About the income declaration? On the directions it just states August 2.
thousand thirteen should we place just that or should we put the distinction? That'' s a good concern a great deal of times points.
will certainly be stated like that its recognized it claimed august thirty one 2 thousand thirteen.
If you didn'' t that ' s fine yet I said for the month ended august thirty one great point. Any type of other concern? Let me offer you your research right here is the.
homework I want you to do I desire you to finish the valentine give out I desire you to do quick.
research study one point six and afterwards I want you to review regarding return on properties ROA its on web page.
twenty two and twenty 3 in your publication and do work out one eighteen ok each phase has.
a proportion at the end of it as well as well discuss those ensure for next lecture which is.
a very important lecture you have your PowerPoint'' s for chapter two

ok.That you have your PowerPoint'' s for phase.
two is everyone right here enrolled in connect ok good are you people in the house registered for.
Connect. Due to the fact that next class period were mosting likely to talk.
Alright any type of questions? Good course duration following class period is an actual.
vital one well see you bye-bye.

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