Pretax income ? Gross profit ? Allocated costs (uncontrollable) $2,040 Labor expense 41,580 Sales
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.
Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values.
| Pretax income | ? |
| Gross profit | ? |
| Allocated costs (uncontrollable) | $2,040 |
| Labor expense | 41,580 |
| Sales | 189,000 |
| Research and development (uncontrollable) | 310 |
| 16,000 | |
| Net income/(loss) | ? |
| Cost of goods sold | 119,070 |
| Selling expense | 1,250 |
| Total expenses | ? |
| Marketing costs (uncontrollable) | 790 |
| Administrative expense | 700 |
| Income tax expense (21% of pretax income) | ? |
| Other expenses | 330 |
A. Prepare the income statement using the above information. Round your answers to the nearest dollar.
| BDS Enterprises | |
| Income Statement | |
| For the Year Ended Dec. 31, 20xx | |
| Sales | $fill in the blank cde9000a3faf056_2 |
| Cost of Goods Sold | fill in the blank cde9000a3faf056_4 |
| Gross Profit | $fill in the blank cde9000a3faf056_6 |
| Labor Expense | $fill in the blank cde9000a3faf056_8 |
| Depreciation Expense | fill in the blank cde9000a3faf056_10 |
| Selling Expense | fill in the blank cde9000a3faf056_12 |
| Administrative Expense | fill in the blank cde9000a3faf056_14 |
| Other Expenses | fill in the blank cde9000a3faf056_16 |
| Allocated Costs (Uncontrollable) | fill in the blank cde9000a3faf056_18 |
| Research and Development (Uncontrollable) | fill in the blank cde9000a3faf056_20 |
| Marketing Costs (Uncontrollable) | fill in the blank cde9000a3faf056_22 |
| Total Expenses | $fill in the blank cde9000a3faf056_23 |
| Pretax Income | $fill in the blank cde9000a3faf056_25 |
| Income Tax Expense (21% of Pretax Income) | fill in the blank cde9000a3faf056_27 |
| Net Income | $fill in the blank cde9000a3faf056_29 |
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