Business 1220 – Financial Statements Ch. 2
3 FINANCIAL 1. SOE – Statement of Earnings: over period of time
Financial 2. B/S – Balance Sheet: at a specific time
3. SRE – Statement of Retained Earnings: over the lifetime
Components of a SOE 0. Gross Sales
1. Net Sales: Gross income – Sales returns & allowances – Sales
SALES 2. Cost of Goods Sold (COGS): Beg. Inv. + Purchases – Ending Inv.
COGS - COGAFS: Beg. Inv + Purchases
Gross Income (Margin, Profit): Net Sales – COGS
3. Operating Expenses:
a. General & admin Exp.
EXPENSES 3 b. Selling Exp.
types of OE c. Amortization Exp.
Earnings from Operations: Gross income – Operating expenses
4. Other Incomes & Other Expenses: interest earned, sale of land,
5. Net earnings before tax
EARNINGS 6. Estimated income tax expense (%)
Components of a B/S 7. Net Earnings after tax
ASSETS (@ lower cost)
Current Assets 1. Current Assets: Cash, Marketable Securities, A/R (– AFDA=NAR) ,
(liquidity) Inventory , Prepaid
2. Investment in subsidiaries: controlling interest (owns 50%), not
Other investments: no controlling interest, @ mkt value