Comparative Balance Sheet Current Year Previous Year Year Before Current Assets Cash $50,000 $100,000 $90,000 Accounts Receivable, net $275,000 $150,000 $100,000 Inventory $580,000 $400,000 $250,000 Prepaid Expenses $25,000 $30,000 $10,000 Total Current Assets $930,000 $680,000 $450,000 Property & Equipment, net $115,000 $150,000 $140,000 Total Assets $1,045,000 $830,000 $590,000 Liabilities & Owner's Equity Current Liabilities Accounts Payable $410,000 $265,000 $190,000 Short-term Payables $175,000 $90,000 $50,000 Total Current Liabilities $585,000 $355,000 $240,000 Long Term Bonds Payable (12%) $50,000 $150,000 $150,000 Total Liabilities $635,000 $505,000 $390,000 Stockholder's Equity Common Stock (100,000 shares) $200,000 $200,000 $200,000 Retained Earnings $248,000 $130,000 $73,000 Total Liabilities and Shareholder's Equity $1,083,000 $835,000 $663,000 Comparitive Income Statements Current Year Previous Year Sales $1,100,000 $875,000 Less: Cost of Goods Sold $550,000 $490,000 Gross Margin $550,000 $385,000 Less: Selling & Admin Expenses $295,000 $240,000 Operating Income $255,000 $145,000 Less: Interest Expense $12,000 $18,000 Income Before Taxes $243,000 $127,000 Less: Income Taxes (40%) $97,200 $50,800 Net Income $145,800 $76,200 Less: Dividends $27,800 $19,200 Net Income, Retained $118,000 $57,000 Current Year Prior Year 1 Current Ratio 2 Quick Ratio 3 Accounts Receivable Turnover (days) 4 Inventory Turnover (days)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
| Comparative Balance Sheet | ||||||||
| Current Year | Previous Year | Year Before | ||||||
| Current Assets | ||||||||
| Cash | $50,000 | $100,000 | $90,000 | |||||
| $275,000 | $150,000 | $100,000 | ||||||
| Inventory | $580,000 | $400,000 | $250,000 | |||||
| Prepaid Expenses | $25,000 | $30,000 | $10,000 | |||||
| Total Current Assets | $930,000 | $680,000 | $450,000 | |||||
| Property & Equipment, net | $115,000 | $150,000 | $140,000 | |||||
| Total Assets | $1,045,000 | $830,000 | $590,000 | |||||
| Liabilities & Owner's Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $410,000 | $265,000 | $190,000 | |||||
| Short-term Payables | $175,000 | $90,000 | $50,000 | |||||
| Total Current Liabilities | $585,000 | $355,000 | $240,000 | |||||
| Long Term Bonds Payable (12%) | $50,000 | $150,000 | $150,000 | |||||
| Total Liabilities | $635,000 | $505,000 | $390,000 | |||||
| Common Stock (100,000 shares) | $200,000 | $200,000 | $200,000 | |||||
| $248,000 | $130,000 | $73,000 | ||||||
| Total Liabilities and Shareholder's Equity | $1,083,000 | $835,000 | $663,000 | |||||
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| Comparitive Income Statements | |||||
| Current Year | Previous Year | ||||
| Sales | $1,100,000 | $875,000 | |||
| Less: Cost of Goods Sold | $550,000 | $490,000 | |||
| Gross Margin | $550,000 | $385,000 | |||
| Less: Selling & Admin Expenses | $295,000 | $240,000 | |||
| Operating Income | $255,000 | $145,000 | |||
| Less: Interest Expense | $12,000 | $18,000 | |||
| Income Before Taxes | $243,000 | $127,000 | |||
| Less: Income Taxes (40%) | $97,200 | $50,800 | |||
| Net Income | $145,800 | $76,200 | |||
| Less: Dividends | $27,800 | $19,200 | |||
| Net Income, Retained | $118,000 | $57,000 | |||
| Current Year | Prior Year | |||||
| 1 | ||||||
| 2 | Quick Ratio | |||||
| 3 | Accounts Receivable Turnover (days) | |||||
| 4 | Inventory Turnover (days) | |||||
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