I need help with International business
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ReviewofBalanceSheetandIncomeStatement.pptReview of Balance Sheet & Income Statement
The following are 9 transactions that typical occur in any business. We selected a Health Club showing the various transactions & ending with the Balance Sheet & Income Statement.
Assets = Liabilities + Owners’ Equity
Cash Capital Stock
+ $ 100,000 = + $ 100,000
The accounting equation must always remain in balance
Issue Capital Stock for Cash
LO3
Stock
Certificate
1/04 Transactions for Glengarry Health Club
3
Purchase of Property in Exchange for Note Payable
Increase on left has
corresponding increase on right
Assets = Liabilities + Owners’ Equity
Land Note Payable
+ $50,000 = + $200,000
Building
+ $150,000
4
Assets = Liabilities + Owners’ Equity
Equip. Accts. Pay.
+ $20,000 = + $20,000
Purchase of Equipment
on Account
At least two accounts affected
by every transaction
I.O.U.
5
Revenue
– Expenses
= Net Income (loss)
Income Statement
Statement of
Retained Earnings
Beg. R/E
+ Net Income (or – Net Loss)
– Dividends
= End. R/E
Effect of Revenue and Expenses on
Retained Earnings
7
Sell Monthly Memberships
on Account
Assets = Liabilities + Owners’ Equity
Accts. Rec. Retained Earnings
+ $15,000 = + $15,000
Revenues increase retained earnings
6
Sell Court Time
Assets = Liabilities + Owners’ Equity
Cash Retained Earnings
+ $5,000 = + $5,000
Revenues increase retained earnings
6
Assets = Liabilities + Owners’ Equity
Cash Retained Earnings
– $10,000 = – $10,000
Expenses decrease retained earnings
Payment of Wages and
Salaries
8
Assets = Liabilities + Owners’ Equity
Cash Retained Earnings
– $3,000 = – $3,000
Payment of Utilities
Expenses also decrease assets or
increase liabilities
8
Collection of
Accounts Receivable
Assets = Liabilities + Owners’ Equity
Cash
+ $4,000 = (no change in Liab. or R/E)
Accts. Rec.
– $4,000
Assets were traded:
accounts receivable for cash
10
Assets = Liabilities + Owners’ Equity
Cash Retained Earnings
– $2,000 = – $2,000
Payment of Dividends
Dividends directly reduce
retained earnings
10
Assets = Liabilities + O/E
Sold stock + $100,000 = + $100,000
Bought prop.
with note + 200,000 = + $200,000
Bought equip.
on acct. + 20,000 = + 20,000
Sold
memberships + 15,000 = + 15,000
Sold court time + 5,000 = + 5,000
Paid wages – 10,000 = – 10,000
Paid utilities – 3,000 = – 3,000
Collected A/R + 4,000 = (no change in Liabilities + OE)
– 4,000
Paid dividends – 2,000 = – 2,000
Cumulative Effect of Transactions for Glengarry Health Club
+ $325,000 = + $220,000 + $105,000
11
Cash
Accounts Receivable
Equipment
Building
Land
Accounts Payable
Notes Payable
Capital Stock
Membership Revenue
Court Fee Revenue
Wage Expense
Utility Expense
Dividends
Totals
$ 94,000
11,000
20,000
150,000
50,000
$ 20,000
200,000
100,000
15,000
5,000
10,000
3,000
2,000
$340,000 $340,000
Debits Credits
LO7
Glengarry Health Club
Trial Balance
January 31, 2007
Glengarry Health Club
Balance Sheet
January 31, 2007
Assets
Cash $ 94,000
Accts. Rec. 11,000
Equipment 20,000
Building 150,000
Land 50,000
Total assets $325,000
Liabilities and Owners’ Equity
Accounts payable $ 20,000
Notes payable 200,000
Capital stock 100,000
Retained earnings 5,000
Total liabilities
and owners’ equity $325,000
Glengarry Health Club
Income Statement
For the Month Ended January 31, 2007
Revenues:
Memberships $15,000
Court fees 5,000 $20,000
Expenses:
Salaries and wages $10,000
Utilities 3,000 13,000
Net income $ 7,000
Net increase to
retained earnings
