第5章---会计循环：报告财务成果.pptVIP

Recall the Adjusted Trial Balance of JJ’s Lawn Care at May 31, 2007, that was completed at the end of Chapter Four.We will use that adjusted trial balance to begin preparing JJ’s financial statements. The first financial statement to prepare is the income statement. Here is JJ’s Income Statement for the month ended May 31, 2007. JJ’s has produced net income of four hundred dollars. Revenues total seven hundred fifty dollars. Expenses include gasoline expense and depreciation on the company’s equipment and truck.Once the income statement is completed, the statement of retained earnings can be prepared. Net income is an integral part of the statement of retained earnings. Remember that net income increases retained earnings. Dividends and net losses decrease retained earnings for the period. JJ’s Lawn Care was started in May, so the beginning balance in retained earnings was zero. We add net income of four hundred dollars to the beginning balance of zero and subtract the dividends paid of two hundred dollars to arrive at the ending retained earnings balance of two hundred dollars.Retained earnings at May 31st will appear on the balance sheet of JJ’s Lawn Care. Note the two hundred dollar balance in Retained Earnings toward the bottom of the balance sheet.The contra accounts, Accumulated Depreciation dash Tools and Equipment and Accumulated Depreciation dash Truck, reduce the balance in the related asset accounts.  Part I This is the income statement for JJ’s Lawn Care at the end of May. Part IINet income impacts the retained earnings of the company.Part III The ending balance of retained earnings appears on the balance sheet. It’s clear to see how all the financial statements articulate with each other. In addition to the basic financial statements, accountants must prepare notes to the financial statements. The purpose of the notes is to explain certain items or transactions to the reader.The first note is usually a summary of significant accounting po