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Assets, Liabilities, and Shareholder Equity Explained, sample balance sheet and income statement.#Sample #balance #sheet #and

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Assets, Liabilities, and Shareholder Equity on the Balance Sheet

Sample balance sheet and income statement

Whenever you pick up the financial statements of a company, any company, and turn to the balance sheet, you ll find it divided into three main sections every time: Assets, Liabilities, and Shareholder Equity. By understanding the role these sections play, and how each one relates to the others, you ll have a much easier time uncovering the economics and financial condition of the company or partnership you are analyzing, including getting an idea of its capital structure.

Assets, Liabilities, and Shareholder Equity

Let s take a moment to briefly examine each.

  • Assets. Broadly speaking, assets are anything that has value. For a company, assets on the balance sheet will consist of things such as land, buildings, desks, lamps, computers, signage, and patents. Some businesses require far more assets to operate than others, which influences return on capital employed calculations.
  • Liabilities. Broadly speaking, liabilities are debts and obligations owed by the company; the opposite of assets. Liabilities include monthly lease payments on real estate, bills to keep the lights turned on and the water running, corporate credit card debt, bonds issued to investors, and other outflows.
  • Shareholder Equity. The equivalent of accounting net worth, shareholder equity is what remains when you subtract all of the liabilities from all of the assets. It is also referred to as book value . For some businesses, book value is highly informative of the economic condition of the firm. For others, book value on the balance sheet is all but meaningless. Learning to distinguish between the two involves understanding how the profitability and business models of differ between firms, industries, and sectors.

    Every balance sheet must balance. It sounds axiomatic, and it is, but it is vitally important to internalize this basic concept from the very beginning of your education. The total value of all assets must be equal to the combined value of​ all liabilities and shareholder equity. For example, if a lemonade stand had $25 in assets and $15 in liabilities, the shareholder equity would be $10.

    The assets are $25, the liabilities shareholder equity $25 [$15 $10]. An easy way to remember this simple formula is A (assets) L (liabilities) E (shareholder equity).

    What Does a Balance Sheet Look Like?

    Below is an example of what a typical balance sheet looks like. I ve taken it from an old Coca-Cola annual report and, for the sake of space, removed lines that had a $0 value. Don t worry, though, we will still discuss each line you are likely to encounter when reading a balance sheet, whether it s for a small business or a large publicly traded corporation, in later lessons.

    If you want to find a balance sheet of your own choosing, the easiest place to get the full regulatory copy that was submitted to the Securities and Exchange Commission (in the case of publicly traded firms) is to get your hands on the company s 10-K filing. These days, they are available for free online and with a few clicks of a button, can be downloaded in a matter of seconds. Companies also routinely reproduce their balance sheet in their annual report to stockholders, though these are often summary versions and don t include the extensive footnotes that we will later get into discussing everything from depreciation policies to allowances for non-repayment of accounts receivable.

    Sample Coca-Cola Balance Sheet

    Consolidated Balance Sheet – January 31, 2001


    Simple Balance Sheet and Income Statement Example, sample balance sheet and income statement.#Sample #balance #sheet

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    Simple Balance Sheet and Income Statement Example

    Mort Thanatopolis, a licensed mortician, has decided to open a funeral home specializing in very low cost funerals. The business will be called “Can U Dig It?” Here is a list of his first month’s cash transactions:

    December 1, Mort opens a business checking account with a deposit of $5,000 of his own funds.

    December 3, Mort pays $1,000 for 1,000 extra large, heavy duty, plastic bags.

    December 5, Mort borrows $1,500 from his sister Morticia.

    December 5, Mort purchases $500 of newspaper advertising.

    December 8, Mort collects $1,200 in fees for three funeral services.

    December 9, Mort pays $155 to a local minister to officiate at the three funerals.

    December 10, Mort uses 3 plastic bags at the funerals.

    The table below illustrates the effect of these transactions on the fundamental accounting equation:

    Sample balance sheet and income statement

    Notice that the basic accounting equation is maintained after each transaction. In the first equation an asset is increased by $5,000 while equity increases by the same amount. In some transactions, like the second, only one side of the equation is changed. One asset, cash, decreased, while another asset, funeral supplies, increased by the same amount. In the third transaction, cash increased and so did a liability in the same amount. The final four transactions involved revenue and expenses, which are increases and decreases in equity. The revenue transaction increased both cash and equity by the same amount. The expenses decreased both assets and equity by the same amount. These transactions and final account balances lead to the following simple balance sheet and income statement.

    Sample balance sheet and income statement

    Sample balance sheet and income statement


    Balance Sheet and Income Statement, Solved Examples, sample balance sheet and income statement.#Sample #balance #sheet

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    Balance Sheet and Income Statement Solved Examples

    The following trial balance is prepared after preparation of income statement for F. Green as at 31 March 2015.

    Sample balance sheet and income statement

    Prepare balance sheet for F. Green as at 31 March 2015 in both horizontal and vertical style.

    In the absence of information about the date of repayment of a liability, then it may be assumed that loan is a non-current liability and a trade payable is a current liability.

    Solution:

    Balance Sheet (Horizontal Style)

    Sample balance sheet and income statement

    As mentioned earlier that vertical style of balance sheet is in fact another way of expressing accounting equation, i.e.,

    Sample balance sheet and income statement

    This relationship is shown in the following balance sheet:

    Balance Sheet (Vertical Style)

    Sample balance sheet and income statement

    We can see in the above balance sheet that total of current assets is not directly added to non-current assets rather this is shown in the inner column. It is to provide a subtotal from which we could deduct total of current liabilities, and so identify net current assets (working capital).

    If we have more than one current liability, then the individual current liabilities would have to be inserted into a third column and then total amount would be carried and deducted from the subtotal of current assets.

    We can see a new item in the vertical style of balance sheet labeled as net current assets because it represents the net worth of current assets after settling outstanding current liabilities. This is also called working capital as this is the amount available to a business for meeting its working (operational) needs of the business.

    The net total non-current assets and net current assets ($54400 in the balance sheet given above) is double underlined to indicate the final total of the first side of the balance sheet. This is called capital employed, however, from examination point of view there is no need to name it as such in the balance sheet.

    Example 2: Preparation of Income Statement and Balance Sheet:

    The following balances are taken from the books of George Anderson at the end of his first year trading on 31 December 2014.

    Sample balance sheet and income statement

    The following additional information is available:

    Inventory at 31 December 2014 was valued at $4500.

    (a) Prepare income statement for the year ended 31 December 2014.

    (b) Prep[are a balance sheet as at 31 December 2014.

    Solution:

    Income Statement

    For the year ended 31 December 2014

    Sample balance sheet and income statement

    Balance Sheet as at 31 December 2014

    Sample balance sheet and income statement


    Sample Income Statement, Basic Accounting Financial Information, sample balance sheet and income statement.#Sample #balance #sheet

    by ,

    Money Instructor

    A Sample Income Statement

    In this series of articles, we’re going to take a look at the Income Statement, why we use it, and what we learn from it. The income statement is the first completed financial statement in the complete package of Income Statement, Balance Sheet, Owner’s Equity Statement and Statement of Cash Flows. In many ways, much of the information we put together for the other statements, is a direct result of the information given on the Income Statement. For this reason alone, the importance of the Income Statement cannot be overstated; but there are other reasons for the significance of the Income Statement and the important role it plays.

    For purposes of clarity, there is a sample Income Statement below, and as we progress through this series, we will use this sample for reference.

    There are 10 articles in the series on the Income Statement:

    1. A Sample Income Statement
    2. How To Prepare an Income Statement
    3. Reading an Income Statement
    4. Format of the Income Statement
    5. Income Statements and the Owner Equity Statement
    6. The Importance of the Income Statement
    7. Income Statements and Budgets
    8. The Balance Sheet and the Income Statement
    9. The Income Statement and Investor Information
    10. The Income Statement and the Statement of Cash Flows

    The Income Statement is a direct result of the information that is recorded in the journals and ledgers, and then transformed into concise, compiled revenue and expense figures. It is usually prepared directly from the monthly closing of the books and provides an accurate picture of the revenue and expense of the business for a specified period of time; usually a month, quarter or year. The Income statement is used by management within the company, but also by investors and creditors outside the company to evaluate profitability, performance and aid in the assessment of risk for the investor or creditor.

    One individual report, with one basic analysis can never provide the big picture that we seek when we begin to assess a company or business, but the Income Statement is one of the initial places of business profit and loss reporting; this makes the case for the belief that accurate initial information, helps a business or company stay on track and maintain financial health.

    The sample Income Statement below is what is known as the single-step format, and is the most easily read format. We will take a look later at the single and multiple step formats, and how to dissect the different information contained within each one.


    Sample Income Statement, Basic Accounting Financial Information, sample balance sheet and income statement.#Sample #balance #sheet

    by ,

    Money Instructor

    A Sample Income Statement

    In this series of articles, we’re going to take a look at the Income Statement, why we use it, and what we learn from it. The income statement is the first completed financial statement in the complete package of Income Statement, Balance Sheet, Owner’s Equity Statement and Statement of Cash Flows. In many ways, much of the information we put together for the other statements, is a direct result of the information given on the Income Statement. For this reason alone, the importance of the Income Statement cannot be overstated; but there are other reasons for the significance of the Income Statement and the important role it plays.

    For purposes of clarity, there is a sample Income Statement below, and as we progress through this series, we will use this sample for reference.

    There are 10 articles in the series on the Income Statement:

    1. A Sample Income Statement
    2. How To Prepare an Income Statement
    3. Reading an Income Statement
    4. Format of the Income Statement
    5. Income Statements and the Owner Equity Statement
    6. The Importance of the Income Statement
    7. Income Statements and Budgets
    8. The Balance Sheet and the Income Statement
    9. The Income Statement and Investor Information
    10. The Income Statement and the Statement of Cash Flows

    The Income Statement is a direct result of the information that is recorded in the journals and ledgers, and then transformed into concise, compiled revenue and expense figures. It is usually prepared directly from the monthly closing of the books and provides an accurate picture of the revenue and expense of the business for a specified period of time; usually a month, quarter or year. The Income statement is used by management within the company, but also by investors and creditors outside the company to evaluate profitability, performance and aid in the assessment of risk for the investor or creditor.

    One individual report, with one basic analysis can never provide the big picture that we seek when we begin to assess a company or business, but the Income Statement is one of the initial places of business profit and loss reporting; this makes the case for the belief that accurate initial information, helps a business or company stay on track and maintain financial health.

    The sample Income Statement below is what is known as the single-step format, and is the most easily read format. We will take a look later at the single and multiple step formats, and how to dissect the different information contained within each one.


    Income Statement and Balance Sheet Lesson Plan, Relationship, Teaching Worksheets, sample balance sheet and income

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    LINKING THE INCOME STATEMENT

    AND BALANCE SHEET

    Topic: A look at the Balance Sheet and Income Statement and how they interrelate.

    Concept: To introduce students to the two financial statements that are reflected in the Accounting Equation and how these two statements are linked and related.

    • Students will understand what an income statement is and which accounts can be found on an income statement
    • Students will learn the basic format of an income statement
    • Students will understand what a balance sheet is and will identify which accounts can be found on a balance sheet
    • Students will learn the basic format of a balance sheet
    • Students will be introduced to the relationship between the balance sheet and the income statement

    Seventh Grade – Eighth Grade – Ninth Grade – Tenth Grade – Eleventh Grade – Twelfth Grade – Adult Education

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    Sample balance sheet and income statement

    INCOME STATEMENT AND BALANCE SHEET LESSON PLAN

    Copies of an Annual Report from a well-known company.

    Lesson Activity

    Understanding the balance sheet and its relationship with the income statement is an important concept in accounting. This lesson introduces the relationship and is a precursor to the next two lessons which look at each statement and associated accounts in more detail

    1. Have students look at the Financial Statements prepared in the annual report.

    2. Discuss the various income statement Accounts

    • Look at the types of revenues.
    • Discuss the various expenses.
    • Discuss net income and explain how it is calculated.

    3. Discuss the various balance sheet account entries

    • Look at each section (assets, liabilities, equity) in detail.
    • Briefly discuss the entries and explain concepts such as depreciation, accrued liabilities, and retained earnings.

    4. Have students identify the common link between the balance sheet and the income statement: earnings

    5. Discuss where earnings are shown on the balance sheet and what earnings represent: an increase in the equity of the company.

    Assessment/Evaluation

    Have students complete worksheet. A suggested passing grade is 70% or greater.

    Sample balance sheet and income statement

    Print out the teaching lesson pages and exercise worksheets for use with this lesson:

    LINKING THE INCOME STATEMENT AND BALANCE SHEET LESSON

    Sample balance sheet and income statement

    This is a lesson on the purpose of the Income Statement, the Balance Sheet, and how they can be used together.

    Sample balance sheet and income statement


    Assets, Liabilities, and Shareholder Equity Explained, sample balance sheet and income statement.#Sample #balance #sheet #and

    by ,

    Assets, Liabilities, and Shareholder Equity on the Balance Sheet

    Sample balance sheet and income statement

    Whenever you pick up the financial statements of a company, any company, and turn to the balance sheet, you ll find it divided into three main sections every time: Assets, Liabilities, and Shareholder Equity. By understanding the role these sections play, and how each one relates to the others, you ll have a much easier time uncovering the economics and financial condition of the company or partnership you are analyzing, including getting an idea of its capital structure.

    Assets, Liabilities, and Shareholder Equity

    Let s take a moment to briefly examine each.

    • Assets. Broadly speaking, assets are anything that has value. For a company, assets on the balance sheet will consist of things such as land, buildings, desks, lamps, computers, signage, and patents. Some businesses require far more assets to operate than others, which influences return on capital employed calculations.
    • Liabilities. Broadly speaking, liabilities are debts and obligations owed by the company; the opposite of assets. Liabilities include monthly lease payments on real estate, bills to keep the lights turned on and the water running, corporate credit card debt, bonds issued to investors, and other outflows.
    • Shareholder Equity. The equivalent of accounting net worth, shareholder equity is what remains when you subtract all of the liabilities from all of the assets. It is also referred to as book value . For some businesses, book value is highly informative of the economic condition of the firm. For others, book value on the balance sheet is all but meaningless. Learning to distinguish between the two involves understanding how the profitability and business models of differ between firms, industries, and sectors.

      Every balance sheet must balance. It sounds axiomatic, and it is, but it is vitally important to internalize this basic concept from the very beginning of your education. The total value of all assets must be equal to the combined value of​ all liabilities and shareholder equity. For example, if a lemonade stand had $25 in assets and $15 in liabilities, the shareholder equity would be $10.

      The assets are $25, the liabilities shareholder equity $25 [$15 $10]. An easy way to remember this simple formula is A (assets) L (liabilities) E (shareholder equity).

      What Does a Balance Sheet Look Like?

      Below is an example of what a typical balance sheet looks like. I ve taken it from an old Coca-Cola annual report and, for the sake of space, removed lines that had a $0 value. Don t worry, though, we will still discuss each line you are likely to encounter when reading a balance sheet, whether it s for a small business or a large publicly traded corporation, in later lessons.

      If you want to find a balance sheet of your own choosing, the easiest place to get the full regulatory copy that was submitted to the Securities and Exchange Commission (in the case of publicly traded firms) is to get your hands on the company s 10-K filing. These days, they are available for free online and with a few clicks of a button, can be downloaded in a matter of seconds. Companies also routinely reproduce their balance sheet in their annual report to stockholders, though these are often summary versions and don t include the extensive footnotes that we will later get into discussing everything from depreciation policies to allowances for non-repayment of accounts receivable.

      Sample Coca-Cola Balance Sheet

      Consolidated Balance Sheet – January 31, 2001


      Company Financials – Income Statement, Balance Sheet, Cash Flow, sample balance sheet and income statement.#Sample

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      Balance Sheet Example and Format, sample balance sheet and income statement.#Sample #balance #sheet #and #income

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      Balance Sheet Example

      This lesson and the balance sheet example below will show the format and components of this key report.

      Sample balance sheet and income statement

      But before we even look at the balance sheet format, here’s a key point: whereas the income statement and statement of changes in equity show changes (to income and expenses or owner’s equity) over a certain period of time, the balance sheet shows the balances of assets, liabilities and owner’s equity on a particular day.

      The balance sheet thus provides a snapshot of a business at an exact point in time – it shows the balances of the various accounts on the last day of the reporting period.

      Balance Sheet Format

      Here is a basic balance sheet format:

      Sample balance sheet and income statement

      As you can see from the balance sheet above, the total of the assets agrees in value (balances) with the total of the owner’s equity and liabilities.

      Let’s compare that report to our original accounting equation:

      Sample balance sheet and income statement

      One can clearly see that the balance sheet shows the accounting equation (or the financial position) of a business, except that this accounting equation is turned on its head and shown in a vertical format, with the assets on top and the equity and liabilities on the bottom.

      Balance Sheet Categories:

      Non-Current Versus Current

      The balance sheet also divides the assets and liabilities into categories.

      Assets and liabilities must be divided up into long-term and short-term categories. Non-current means long-term and current means short-term.

      The dividing line between current and non-current is one year from the date that the balance sheet is issued.

      In other words, an asset will be classified as current if it is expected to be sold (or used) within a year from the date of the report.

      An asset will be classified as non-current if it is expected to be used for more than one year.

      A liability that is expected to be paid off within a year, such as a creditor, is classified as current.

      A loan, which is expected to be paid off more than a year from the balance sheet date, is classified as a non-current liability.

      The division of assets and liabilities into these categories is done to provide more meaningful information to the readers of this report.

      More Notes on the Balance Sheet

      One type of asset that we haven’t gone over in previous lessons is investments. Investments are also known as other financial assets.

      This category of assets includes investments in other businesses as well as long-term investments with the bank. Note that investments are usually non-current assets (unless you intend to sell off the investment within a year, in which case it is classified as a current asset).

      As mentioned previously, inventory are stock or goods. See our later section on inventory for numerous lessons on this topic.

      The “10% loan” means that we have a loan that has a 10% interest charge on it per year.

      Just like the previous two statements, the balance sheet is usually drawn up annually.

      Putting Together the Balance Sheet

      Here is our previous trial balance for George’s Catering again.

      Sample balance sheet and income statement Sample balance sheet and income statement Sample balance sheet and income statement

      Our balance sheet is going to require the balances of all assets and liabilities. So we stick these in there. That’s fairly simple.

      But what about the owner’s equity – what do we do with this?

      The answer is that we take the closing balance of the owner’s equity from the statement of changes in equity and put this in our balance sheet. Here’s how this accounting report looked from the last lesson:

      Sample balance sheet and income statement Sample balance sheet and income statement Sample balance sheet and income statement

      And this is how the balance sheet for George’s Catering would look:

      Sample balance sheet and income statement Sample balance sheet and income statement Sample balance sheet and income statement

      So we draw up the income statement first and get the profit, then put this profit into the statement of owner’s equity and get the closing balance of owner’s equity, and then take this closing balance and put it into our balance sheet.

      FYI if you check the balance sheet example above, the balances of the assets, liabilities and the owner’s equity is the same as what we calculated in earlier lessons.

      Sample balance sheet and income statement

      Just like the income statement, the balance sheet can also be drawn up at the start of the period with budgeted figures, and these budgeted figures (assets, liabilities, equity) can later be compared to actual results on a specific day.


      2016 IRA Cheat Sheet Contribution Limits for Traditional, Roth, Simple and SEP IRAs #income #tax

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      #traditional ira income limits

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      Ultimate 2016 IRA Contribution Cheat Sheet

      In 2016, the IRS changed many of the IRA limits allowed for every type of account. Keep track of all the tax, income and contribution limits with this handy chart below.

      For complete IRA information see:

      1. 2016 Traditional IRA Rules Covers all 2016 Traditional IRA Regulations
      2. 2016 Roth IRA Limits Roth IRA rules have changed this year.
      3. SEP Contribution Limits Up to date information on 2016 SEP IRA Contributions
      4. Simple IRA Rules Complete Guide to Simple IRAs

      The good news is that limits are rising across the board for all types of individual retirement accounts. This includes both Roth and Traditional IRAs, as well as Simple and SEP plans. Don t forget your contribution deadlines .

      2016 IRA Contribution Cheat Sheet for Roth, SEP, Simple and Traditional Retirement Accounts

      Embed This Image On Your Site (copy code below):

      2016 Plain Text Version

      I. Roth IRAs

      1. No Taxes on Capital gains or dividends
      2. Tax-free growth No tax on retirement withdrawals
      3. Contributions are not tax deductable

      Max Contribution Limits: $5500
      Catch-Up Contributions Age 50+: $1000 Additional

      Total combined contributions to Roth and/or traditional IRAs may not exceed these amounts.

      Roth IRA Income Limits

      Use this 2016 IRA contribution limits chart to find your maximum contribution based on income (AGI ).

      Your Tax Filing Status

      1. Employers required to contribute
      2. Similar to 401k
      3. Easy Setup

      Max Contribution Limits: $12,500
      Catch-Up Contributions Age 50+: $3000 Additional

      If you participate in additional salary reduction plans offered by your employer, total contributions may not exceed $18,000 not including catch-up contributions.

      For Employers

      Matching Conributions Up to 3%
      Non-elective Contributions 2% of employee s salary

      IV. SEP IRAs

      1. Contributions are Deductible
      2. Highest Contribution Limits
      3. Low Administrative Costs

      For Self-Employed and Small Business Owners

      Max Contribution Limits

      • 25% of an Employee s Salary
        or
      • $53,000
        Whichever is smaller


      Catch-Up Contributions: None Allowed

      If you participate in additional salary reduction plans offered by your employer, total contributions may not exceed $18,000 not including catch-up contributions.

      For Employees

      If your SEP IRA allows for non-SEP contributions, then you can make tax-deductible contributions up to your maximum IRA limit generally $5500-6500.