Descripción de los tipos de suelos

2. Classify the accounts affected.

3. Determine the increase or decrease for each account. 4. Apply the rules of debit and credit.

Using debits and credits, you can compute your fi nancial results and communicate those results to others. At the end of the accounting period, the account balances are totaled and reported in fi nancial statements.

Financial statements are reports that summarize information about the

fi nancial performance and status of the business; this is the “output” of the system.

The three main fi nancial statements are as follows: • Balance sheet.

• Income statement.

• Statement of owner’s equity.

These fi nancial statements are standard reports that can go to people outside the company. For example, a bank will want to see your fi nancial statements before granting a loan.

Some businesses prepare a fourth fi nancial statement called the state- ment of cash fl ows. This chapter briefl y touches on two fi nancial state- ments: the balance sheet and the income statement. Chapter 7 goes into more detail about these two statements as well as the statement of owner’s equity.

2.2.1 The Balance Sheet

The balance sheet is the fi nancial statement that presents a snapshot of the

company’s fi nancial position as of a particular date in time; as such, the title of a balance sheet shows the date of the snapshot. It’s called a balance sheet Financial statements:

Reports that summarize information about the fi nancial performance and status of the business.

Financial statements:

Reports that summarize information about the fi nancial performance and status of the business.

Balance sheet:

The fi nancial statement that presents a snapshot of the company’s fi nancial position as of a particular date in time.

Balance sheet:

The fi nancial statement that presents a snapshot of the company’s fi nancial position as of a particular date in time.

You went to the neighborhood newspaper offi ce and wrote a check for an advertisement in the next weekend edition. Which ac- count will be debited? Which account will be credited?

SELF-CHECK

1. Describe the difference between debit and credit. 2. What is meant by normal balance?

3. List fi ve account types and give a brief description of each type.

Include the normal balance in your description.

4. What is the accounting equation? Restate the accounting equation in

your own words. Apply Your Knowledge

2.2 OVERVIEW OF FINANCIAL

STATEMENTS

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because the things owned by the company (assets) must equal the claims against those assets (liabilities and equity):

Assets  Liabilities  Equity The balance sheet has three sections:

• Assets. • Liabilities. • Equity.

See Figure 2-3 for an example of a balance sheet.

Figure 2-3

The balance sheet refl ects the accounting equation. REVIS BOOKKEEPING SERVICE

Balance Sheet As of May 31, 200X Assets Cash in Checking Computer Equipment 5,200 3,500 $ Total Assets $ 8,700 Liabilities Accounts Payable $ 1,500 Equity

Lonnie Revis, Capital 7,200

Total Liabilities and Equity $ 8,700

Ownership Matters

Robert’s interior plantscape business began small—with him caring for the plants of a single offi ce building. Now that his business is growing, he and two friends have decided to form a partnership. The company will now have a Capital account for each partner:

• Robert Drew, Capital • Amy Cheung, Capital • Joe Popo, Capital

IN THE REAL WORLD

(continued)

2.2.2 The Income Statement

The income statement is the fi nancial statement that presents a summary

of the company’s fi nancial activity over a certain period of time, such as a month, quarter, or year; the title of an income statement shows the period of time covered by the statement. The difference between the balance sheet and the income statement is like the difference between a snapshot and a video. One is a point in time; the other is a period of time.

The income statement has three sections: • Revenue.

• Expenses.

• Net Income (or Net Loss).

The income statement starts with revenue earned, subtracts the expenses, and ends with the bottom line—net income or loss. The income statement in Figure 2-4 shows a net income.

Income statement:

The fi nancial statement that presents a summary of the company’s fi nancial activity over a certain period of time.

Income statement:

The fi nancial statement that presents a summary of the company’s fi nancial activity over a certain period of time.

Small Business Accounting in Action

Interpret the balance sheet and income statement.

Suppose a potential investor wants to know about your business’s fi nances. What would you do?

SELF-CHECK

1. What is a balance sheet? Why is it called a “balance sheet”? 2. Which debit accounts appear on the balance sheet? Which credit

accounts?

3. What is an income statement? Which debit accounts are on the in-

come statement? Which credit accounts?

4. What is the bottom line of an income statement?

5. How do the titles of a balance sheet and an income statement differ?

Apply Your Knowledge

IN THE REAL WORLD

Although the partners are satisfi ed with the current arrangement, if and when the business were to be incorporated, the balance sheet will show two equity accounts:

• Capital Stock. • Retained Earnings.

Capital Stock is the total amount invested by shareholders. The Retained Earnings account contains accumulated profi ts kept in the corporation (not paid out to shareholders).

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Figure 2-4

The income statement shows the results for an accounting period. REVIS BOOKKEEPING SERVICE

Income Statement For the Month Ended May 31, 200X Revenue Fees Income $ 5,200 Expenses Advertising $ 100 Office Supplies 300 Telephone 100 Total Expenses 500 Net Income $ 4,700

As you record transactions, you need a roadmap to help you determine which accounts to use. This roadmap is called the chart of accounts, which is a list of all the accounts your business has.

Every business creates its own chart of accounts based on how the busi- ness is operated and structured, so you’re unlikely to fi nd two businesses with identical charts of accounts. There’s no secret to making your own chart—just make a list of the accounts that apply to your business.

Some basic characteristics are common to all charts of accounts. The organization and structure are designed around the balance sheet and the income statement.

2.3.1 Account Sections

The chart of accounts starts with the balance sheet accounts (assets, liabili- ties, and equity) and ends with income statement accounts (revenue and expenses).