Income Statement:
It is a financial statement that shows the
It is a financial statement that shows the amount of profit retained by the company for future unforeseen events.
It shows the financial position of an enterprise. It consists of assets, liabilities, and
Closing Entries:
These entries are made for those items whose balance needs to be zero for the next accounting period otherwise data from two accounting periods will get mixed and we only want to see the data of one accounting period in it.
Accounting rules regarding journal entries:
- Balance increases when: Assets, losses, and expenses get debited and liabilities, gains, and revenue get credited.
- Balance decrease when: Assets, losses, and expenses get credited and liabilities, gains, and revenue get debited.
Return on Asset:
It tells about how much the company is earning from the total amount of assets it has. It is determined by dividing net income from total average assets into percentage terms.
Debt Ratio:
It shows how much of the company’s assets are bought using debt capital. The higher the debt ratio higher the financial risk, lower the debt ratio lower the financial risk. it comes after dividing debt capital by total assets.
Profit Margin Ratio:
It shows how much the company is earning for every dollar of its revenue. It comes after dividing net sales from revenue into percentage terms.
It shows whether the company will be able to pay its current liabilities out of its current asset or not. It comes after dividing current liabilities by current assets.
1.
To prepare: Income statement, statement of retained earnings, and classified balance sheet.
2.
To prepare: Closing entries
3.
a.
Return on assets ratio.
b.
Debt ratio.
c.
Profit margin ratio.
d.
Current ratio.

Want to see the full answer?
Check out a sample textbook solution
Chapter 3 Solutions
FIN MANAG. ACCT. (LL) W/CONNECT (1TERM)
- need this general accounting subjects solutionsarrow_forwardFinancial Accounting 5.2arrow_forwardMorgan & Co. is currently an all-equity firm with 100,000 shares of stock outstanding at a market price of $30 per share. The company's earnings before interest and taxes are $120,000. Morgan & Co. has decided to add leverage to its financial operations by issuing $750,000 of debt at an 8% interest rate. This $750,000 will be used to repurchase shares of stock. You own 2,500 shares of Morgan & Co. stock. You also loan out funds at an 8% interest rate. How many of your shares of stock in Morgan & Co. must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College


