Chapter 2
Linking Personal Accounting to Business Accounting
49
Financial Statements
Now that the T-account worksheet is complete, we can prepare formal financial statements. All
financial statements follow certain formatting standards when being created.
•
Each statement will have three lines at the top to identify the company (e.g. Ace Book-
keepers), the statement (e.g. Income Statement) and the time period or date the statement
covers (e.g. For the Month Ended March 31, 2016).
•
The first number in each column will have a dollar sign to indicate the currency of values
presented in the statement.
•
The last number in a calculated column will have a single underline to indicate a total or
subtotal is being calculated.
•
The final number on the financial statement, or in the case of the balance sheet the total
assets and the total liabilities and owner’s equity figures, will have a dollar sign and be double
underlined.
The first statement to complete is the income statement shown in Figure 2.31. Recall that this
reports on the revenue earned and expenses incurred during the period. For Ace Bookkeepers, this
income statement is for the month ended March 31, 2016 and shows a net income of $9,400.
Ace Bookkeepers
Income Statement
For the Month Ended March 31, 2016
Revenue
Service Revenue
$19,000
Expenses
Interest Expense
$200
Rent Expense
1,100
Salaries Expense
6,000
Telephone Expense
300
Travel Expense
2,000
Total Expenses
9,600
Net Income
$9,400
______________
FIGURE 2.31
1
The
Statement of Owner’s Equity
is the formal statement to show how owner’s equity changed
during the month. It will cover the same reporting period as the income statement, so Ace Book-
keepers will prepare the statement of owner’s equity for the month ended March 31, 2016. The
basic calculation for the change in equity was shown at the bottom of the T-account worksheet in
Figure 2.30. The statement of owner’s equity is the formal presentation of this calculation and is
shown in Figure 2.32.
