Introduction to Financial Accounting

Introduction to Financial Accounting

Introduction

This assignment will test the basic accounting methods that are used in preparing financial statements of a company. This assignment lets the student apply the theoretical concepts of accounts in their real lives.

Adjustment Entries

Adjustment Entries

Debit

Credit

Cost of Goods sold

3650

Inventory

3650

Cash

10000

Acc Receivable

10000

Adjusted Trial Balance

Pickett Company

31-Dec-11

Adjusted Trial Balance

Accounts

Debit

Credit

Accounts payable

$ 24500

Accounts receivable

$ 8000

Cash

$ 51500

Common stock

$ 10000

Depreciation expense

$ 18250

Cost of goods sold

$ 396900

Equipment (net of depreciation)

$ 325000

Insurance

$ 1500

Inventory

$ 75000

Long-term debt

$ 105000

Marketing

$ 5600

Misc. expenses

$ 4500

Paid-in capital

$ 90000

Property taxes

$ 6500

Rent expense

$ 22000

Retained earnings

$ 148150

Revenues

$ 605000

Salaries

$ 60500

Utilities

$ 7400

Total

$ 982650

$ 982650

One of the easiest ways to figure out if your company's budget is working efficiently is to prepare a trial balance sheet. Trial balance is a way for you to balance your income with your expenditures (Tshabalala, 2007).

Income Statement

Pickett Company

31-Dec-11

Income Statement

Revenue

$ 605000

Less: Cost of Goods sold

$ 396900

Gross Profit

$ 208100

Less: Expenses

Depreciation expense

$ 18250

Insurance

$ 1500

Marketing

$ 5600

Misc. expenses

$ 4500

Property taxes

$ 6500

Rent expense

$ 22000

Salaries

$ 60500

Utilities

$ 7400

Net Income

$ 81850

About Income statement

The income statement, also labeled the statement of operations measures a company's performance a specified period of lime. It is frequently called “profit and loss account” For this reason the statement is titled for a period of time for example, year ending May 27, 2011 (Tshabalala, 2007).The statement is different from the balance sheet because it is a cumulative record of activity for a month, quarter, multiple quarters, or for one year. Creditors, investors, and many others use the income statement as a measuring stick of how a company has performed, where it appears to be heading, and what its future cash flows will be.

An income statement, also known as a profit-and-loss statement, is a financial document that indicates the sales, expenses and profit of an organization during a specified time period (Shipman, 2004). The income statement lists the sales first, then lists direct materials ...