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Balance Sheet

and Income
Statement

Prepared by:
Ezrha C. Godilano
BSIE, CIE
ecgodilano@mcl.edu.ph
Objectives
After the exercise, students should be able to:
• Know how to prepare a balance sheet and
income statement using MS Excel
spreadsheets.

• Know how to apply accounting formula in MS


Excel.
Assumptions
Students are familiar with:
• Accounting terms and concepts used in
preparing balance sheet and income
statement

• Familiar with the structure of a balance sheet


and income statement.
Review and Discussion
Balance sheet
Defined as an itemized statement of the assets,
liabilities, and proprietorship of the business.

It is a statement reflecting the financial condition


of the business at the date of its preparation.

Shows the composition of the property of the


business, its debts to outsiders, and the equity of
the owners or members.
Review and Discussion
• Note:
– It is necessary to classify or group the assets
according to their ready availability for paying
debts, and to classify the obligations in the order
or sequence of their maturity.
Classifications of Assets
• Current Assets
– Include cash and other assets which are to be
converted to cash within a reasonable period of
time, usually a year, from the balance sheet date
without interruption to the regular operations of
the business.

– Includes receivables, merchandise inventories,


and prepaid expenses.
Classifications of Assets
• Fixed Assets (Non-current)
– Include capital assets of a more or less permanent
nature acquired for use rather than for resale.

– Examples are land, property, equipment,


buildings, machineries, tools, furniture and
fixtures, and the like.
Basic Accounting Equation

ASSETS = LIABILITIES + CAPITAL


Classifications of Liabilities
• Current Liabilities
– Include debts maturing within the next year from
the balance sheet date.

– Examples are accounts payable to trade creditors,


short-term notes payable, and bank loans.
Classifications of Liabilities
• Fixed Liabilities (Non-current)
– Include debts maturing generally beyond next
year.

– Examples are long-term notes payable, mortgages


payable, and other debts payable over a period of
more than one year.
Income Statement
• Defined as the statement of revenue and
expenses.
• Expenses are deducted from revenue.
• Shows the net changes in the owner’s equity
that result from operating at a profit or at a
loss.
• Used to measure revenue and expenses for a
given accounting (fiscal) period.
Income Statement
• NET INCOME
– If revenue exceeds expenses

• NET LOSS
– If expenses exceed revenue
Example
From the following facts accumulated for the
month of June 2008, prepare a balance sheet
and income statement of Juan dela Cruz.
Example
Cash 294,000
Jeeps 165,000
Furnitures 29,000
Due to Nicfur Co. 13,000
Additional Investment 9,000
J. dela Cruz, Capital 405,000
J. dela Cruz, Withdrawal 19,000
Net profit 20,600
Office rent expense 2,400
Salaries expense 12,000
Transportation income 35,000
Solution
Solution
Exercise 4
Balance Sheet and Income Statement
Instructions:
Save your all the Excel Sheets in ONE Excel File. Label the
sheets as Problem 4-A, Problem 4-B, etc.
File name should be in the format: LAST NAME_Exer4
Problem 4-A
• From the following facts accumulated for the
month of August 2009, prepare a Balance
sheet and Income Statement of ABC
Company.
Problem 4-A
Cash Php 30,000
Truck 45,000
Furniture 20,000
Due from Holiday (customer) 13,000
Due to X Company (creditor) 16,000
ABC Company, Capital 77,000
ABC Company, Withdrawal 7,000
Delivery income 50,000
Rent expense 3,000
Delivery salaries expense 11,000
General expenses 14,000
Questions
1. How are the assets and liabilities of ABC
Company affected by receiving Php 3,000 from
AGV Company for professional services?

2. Does this balance sheet indicate that the


company is in a strong financial position?
Explain and support your answer.

3. Conclusion
Problem 4-B
• Use the following figures to create a Balance
Sheet and Income Statement for the month
ended October 31, 2009 of XYZ Company.
Problem 4-B
Cash Php 100,000
Accounts Receivable 20,000
Equipment 50,000
Bank Loan 60,000
Accounts Payable 1,000
Notes Payable 34,000
Common Stock 49,000
Net Income 26,000
Service Revenue 120,000
Rent expense 14,000
Salaries expense 60,000
Supplies expense 10,000
Travel expenses 10,000
Question
1. What is the current financial position of the
company? Explain and support your answer.

2. If XYZ’s net income increased to Php 150,000


and the owner decided to make an additional
investment of Php 30,000, what changes or
conflicts (if any) are possible to occur in the
financial statements? Site examples to
support your answer.