Selected comparative financial statements of Korbin Company follow. KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 2019 Sales $ 426,799 $ 326,963 $ 226,900 Cost of goods sold 256,933 204,352 145,216 Gross profit 169,866 122,611 81,684 Selling expenses 60,605 45,121 29,951 Administrative expenses 38,412 28,773 18,833 Total expenses 99,017 73,894 48,784 Income before taxes 70,849 48,717 32,900 Income tax expense 13,178 9,987 6,679 Net income $ 57,671 $ 38,730 $ 26,221 KORBIN COMPANY Comparative Balance Sheets December 31 2021 2020 2019 Assets Current assets $ 60,849 $ 40,727 $ 54,442 Long-term investments 0 700 3,020 Plant assets, net 111,285 101,564 61,006 Total assets $ 172,134 $ 142,991 $ 118,468 Liabilities and Equity Current liabilities $ 25,132 $ 21,306 $ 20,732 Common stock 63,000 63,000 45,000 Other paid-in capital 7,875 7,875 5,000 Retained earnings 76,127 50,810 47,736 Total liabilities and equity $ 172,134 $ 142,991 $ 118,468
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.
Selected comparative financial statements of Korbin Company follow.
| KORBIN COMPANY | |||
| Comparative Income Statements | |||
| For Years Ended December 31 | |||
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Sales | $ 426,799 | $ 326,963 | $ 226,900 |
| Cost of goods sold | 256,933 | 204,352 | 145,216 |
| Gross profit | 169,866 | 122,611 | 81,684 |
| Selling expenses | 60,605 | 45,121 | 29,951 |
| Administrative expenses | 38,412 | 28,773 | 18,833 |
| Total expenses | 99,017 | 73,894 | 48,784 |
| Income before taxes | 70,849 | 48,717 | 32,900 |
| Income tax expense | 13,178 | 9,987 | 6,679 |
| Net income | $ 57,671 | $ 38,730 | $ 26,221 |
| KORBIN COMPANY | |||
| Comparative |
|||
| December 31 | |||
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Assets | |||
| Current assets | $ 60,849 | $ 40,727 | $ 54,442 |
| Long-term investments | 0 | 700 | 3,020 |
| Plant assets, net | 111,285 | 101,564 | 61,006 |
| Total assets | $ 172,134 | $ 142,991 | $ 118,468 |
| Liabilities and Equity | |||
| Current liabilities | $ 25,132 | $ 21,306 | $ 20,732 |
| Common stock | 63,000 | 63,000 | 45,000 |
| Other paid-in capital | 7,875 | 7,875 | 5,000 |
| 76,127 | 50,810 | 47,736 | |
| Total liabilities and equity | $ 172,134 | $ 142,991 | $ 118,468 |
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