Financial Statement Preparation Business Transactions must be recorded Generally Accepted Accounting Principles (GAAP) are employed to record transactions GAAP requires that business transactions be recorded using the following classifications: ASSETS Property owned by the business LIABILITIES Debts of the business EQUITY Stock, Retained Earnings, Treasury Stock REVENUE Sales of Services or Products EXPENSES Costs of Doing Business Sample Transactions SOLD SERVICES FOR CASH $ 5,000 CASH INCREASES =ASSET SERVICES INCREASES = REVENUE PAID RENT $ 2,000 RENT EXPENSES INCREASES = EXPENSES CASH DECREASES = ASSET PURCHASED INVENTORY ON ACCOUNT INVENTORY INCREASES = ASSET ACCOUNTS PAYABLE INCREASES = LIABILITY JOURNALIZED AND POSTED TRANSACTIONS TRIAL BALANCE Financial Statements * A business is usually defined as a commercial enterpriseSome are run by only one person who carry out all of the required functionsOthers employ thousands of people and provide goods and services to people all over the worldEach business can be defined or described by its type of ownership, the goods produced or services offered, the types of jobs provided, or the functions it performs in a community * Businesses are started by entrepreneurs who see a need, recognize the opportunity, and go into business to meet that need Business and people need each other – there are many stakeholders – we depend on businesses for products and services, but also for employmentBuy inputs – raw materials, labour, machinery and equipment, and landProduce outputs – goods and servicesFocus on efficient use of resourcesGenerate profit/surplus Who are the stakeholders? – Anyone who has an interest in the success of a business Customers Managers Employees Owners Local Community/Environment Suppliers Government Creditors * Take Inputs Process/Manufacture Output Costs – Fixed and Variable Revenue Profit * A group of businesses that all produce similar products is called an industry Example: Automobile manufacturers and automobile parts is the Automobile Industry Separated into three categories – primary, secondary, and tertiary * * * * * * * * © The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin BASIC FINANCIAL STATEMENTS Chapter 2 2 © The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Introduction to Financial Statements Companies prepare interim financial statements and annual financial statements. 2000 X © The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Introduction to Financial Statements Three primary financial statements. Income Statement Balance Sheet Statement of Cash Flows We will use a corporation to describe these statements. © The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Introduction to Financial Statements Describes where the enterprise stands at a specific date. Income Statement Balance Sheet Stat.

1. Financial Statement Preparation
Business Transactions must be recorded
Generally Accepted Accounting Principles (GAAP) are
employed to record transactions
GAAP requires that business transactions be recorded using the
following classifications:
ASSETS Property owned by the business
LIABILITIES Debts of the business
EQUITY Stock, Retained Earnings, Treasury Stock
REVENUE Sales of Services or Products
EXPENSES Costs of Doing Business
Sample Transactions
SOLD SERVICES FOR CASH $ 5,000
CASH INCREASES =ASSET
SERVICES INCREASES = REVENUE
PAID RENT $ 2,000
RENT EXPENSES INCREASES = EXPENSES
CASH DECREASES = ASSET
PURCHASED INVENTORY ON ACCOUNT
INVENTORY INCREASES = ASSET
ACCOUNTS PAYABLE INCREASES = LIABILITY

2. JOURNALIZED AND POSTED TRANSACTIONS
TRIAL BALANCE
Financial Statements
*
A business is usually defined as a commercial enterpriseSome
are run by only one person who carry out all of the required
functionsOthers employ thousands of people and provide goods
and services to people all over the worldEach business can be
defined or described by its type of ownership, the goods
produced or services offered,

3. the types of jobs provided, or the functions
it performs in a community
*
Businesses are started by entrepreneurs who see a need,
recognize the opportunity, and go into business to meet that
need Business and people need each other – there are many
stakeholders – we depend on businesses for products and
services, but also for employmentBuy inputs – raw materials,
labour, machinery and equipment, and landProduce outputs –
goods and servicesFocus on efficient use of resourcesGenerate
profit/surplus
Who are the stakeholders? – Anyone who has an interest in the
success of a business
Customers
Managers
Employees
Owners
Local Community/Environment
Suppliers
Government
Creditors
*

4. Take Inputs
Process/Manufacture
Output
Costs – Fixed and Variable
Revenue
Profit
*
A group of businesses that all produce similar products is called
an industry
Example: Automobile manufacturers and automobile parts
is the Automobile Industry
Separated into three categories – primary, secondary, and
tertiary
*

5. *
*
*
*
*

6. *
*
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
BASIC FINANCIAL STATEMENTS
Chapter
2
2

7. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Companies prepare interim financial statements and annual
financial statements.
2000
X
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Three primary financial statements.
Income Statement
Balance Sheet
Statement of Cash Flows
We will use a corporation to describe these statements.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Describes where the enterprise stands at a specific date.
Income Statement
Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002

8. McGraw-Hill/Irwin
Introduction to Financial Statements
Depicts the revenue and expenses for a designated period of
time.
Income Statement
Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Revenues result in positive cash flow.
Expenses result in negative cash flow.
Either in the past, present, or future.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Net income (or net loss) is simply the difference between
revenues and expenses.
Income Statement

9. Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Introduction to Financial Statements
Depicts the ways cash has changed during a designated period
of time.
Income Statement
Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
The Concept of the Business Entity
Vagabond Travel Agency
A business entity is separate from the personal affairs of its
owner.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
A Starting Point: Statement of Financial Position
Sheet1Vagabond Travel AgencyBalance SheetDecember 31,

10. 2002AssetsLiabilities & Owners' EquityCash$
22,500Liabilities:Notes receivable10,000Notes payable$
41,000Accounts receivable60,500Accounts
payable36,000Supplies2,000Salaries
payable3,000Land100,000Total liabilities$
80,000Building90,000Owners' Equity:Office
equipment15,000Capital stock150,000Retained
earnings70,000Total$ 300,000Total$ 300,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Assets
Assets are economic resources that are owned by the business
and are expected to provide positive future cash flows.
Sheet1Vagabond Travel AgencyBalance SheetDecember 31,
2002AssetsLiabilities & Owners' EquityCash$
22,500Liabilities:Notes receivable10,000Notes payable$
41,000Accounts receivable60,500Accounts
payable36,000Supplies2,000Salaries
payable3,000Land100,000Total liabilities$
80,000Building90,000Owners' Equity:Office
equipment15,000Capital stock150,000Retained
earnings70,000Total$ 300,000Total$ 300,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin

11. Assets
Cost Principle
Going-Concern
Assumption
Objectivity
Principle
Stable-Dollar
Assumption
These accounting principles support cost as the basis for asset
valuation.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Liabilities
Liabilities are debts that represent negative future cash flows
for the enterprise.
Sheet1Vagabond Travel AgencyBalance SheetDecember 31,
2002AssetsLiabilities & Owners' EquityCash$
22,500Liabilities:Notes receivable10,000Notes payable$
41,000Accounts receivable60,500Accounts
payable36,000Supplies2,000Salaries
payable3,000Land100,000Total liabilities$
80,000Building90,000Owners' Equity:Office
equipment15,000Capital stock150,000Retained
earnings70,000Total$ 300,000Total$ 300,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Owners’ Equity

12. Owners’ equity represents the owner’s claim to the assets of the
business.
Sheet1Vagabond Travel AgencyBalance SheetDecember 31,
2002AssetsLiabilities & Owners' EquityCash$
22,500Liabilities:Notes receivable10,000Notes payable$
41,000Accounts receivable60,500Accounts
payable36,000Supplies2,000Salaries
payable3,000Land100,000Total liabilities$
80,000Building90,000Owners' Equity:Office
equipment15,000Capital stock150,000Retained
earnings70,000Total$ 300,000Total$ 300,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Owners’ Equity
Changes in Owners’ Equity
Owners’ Investments
Business Earnings
Payments to Owners
Business Losses
© The McGraw-Hill Companies, Inc., 2002

13. McGraw-Hill/Irwin
The Accounting Equation
Assets = Liabilities + Owners’ Equity
$300,000 = $80,000 + $220,000
3
Sheet1Vagabond Travel AgencyBalance SheetDecember 31,
2002AssetsLiabilities & Owners' EquityCash$
22,500Liabilities:Notes receivable10,000Notes payable$
41,000Accounts receivable60,500Accounts
payable36,000Supplies2,000Salaries
payable3,000Land100,000Total liabilities$
80,000Building90,000Owners' EquityOffice
equipment15,000Capital stock150,000Retained
earnings70,000Total$ 300,000Total$ 300,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Let’s analyze some transactions for JJ’s Lawn Care Service.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin

14. On May 1, 2003, Jill Jones and her family invested $8,000 in
JJ’s Lawn Care Service and received 800 shares of stock.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 1,
2003AssetsOwners' EquityCash$ 8,000Capital Stock$
8,000Total$ 8,000Total$ 8,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 2, JJ’s purchased a riding lawn mower for $2,500 cash.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 2,
2003AssetsOwners' EquityCash$ 5,500Capital Stock$
8,000Tools & Equipment2,500Total$ 8,000Total$ 8,000
&A
Page &P

15. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 8, JJ’s purchased a $15,000 truck.
JJ’s paid $2,000 down in cash and issued a note payable for the
remaining $13,000.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 8,
2003AssetsLiabilities and Owners' EquityCash$
3,500Liabilities:Tools & Equipment2,500Notes Payable$
13,000Truck15,000Owners' Equity:Capital Stock8,000Total$
21,000Total$ 21,000
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 11, JJ’s purchased some repair parts for $300 on
account.
3

16. Sheet1JJ's Lawn Care ServiceBalance SheetMay 11,
2003AssetsLiabilities and Owners' EquityCash$
3,500Liabilities:Tools & Equipment2,800Notes Payable$
13,000Truck15,000Accounts Payable300Total Liabilities$
13,300Owners' Equity:Capital Stock8,000Total$ 21,300Total$
21,300
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Jill realized she had purchased more repair parts than needed.
On May 18, JJ’s was able to sell half of the repair parts to ABC
Lawns for $150, a price equal to JJ’s cost. JJ’s will receive the
cash within 30 days.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 18,
2003AssetsLiabilities and Owners' EquityCash$
3,500Liabilities:Accounts Receivable150Notes Payable$
13,000Tools & Equipment2,650Accounts
Payable300Truck15,000Total Liabilities$ 13,300Owners'
Equity:Capital Stock8,000Total$ 21,300Total$ 21,300
&A
Page &P

17. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 25, ABC Lawns pays JJ’s $75 as a partial settlement of
its accounts receivable.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 25,
2003AssetsLiabilities and Owners' EquityCash$
3,575Liabilities:Accounts Receivable75Notes Payable$
13,000Tools & Equipment2,650Accounts
Payable300Truck15,000Total Liabilities$ 13,300Owners'
Equity:Capital Stock8,000Total$ 21,300Total$ 21,300
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 28, JJ’s pays $150 of its accounts payable.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 28,

18. 2003AssetsLiabilities and Owners' EquityCash$
3,425Liabilities:Accounts Receivable75Notes Payable$
13,000Tools & Equipment2,650Accounts
Payable150Truck15,000Total Liabilities13,150Owners'
Equity:Capital Stock8,000Total$ 21,150Total$ 21,150
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
On May 29, JJ’s recorded lawn care services provided during
May of $750. All clients paid in cash.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 29,
2003AssetsLiabilities and Owners' EquityCash$
4,175Liabilities:Accounts Receivable75Notes Payable$
13,000Tools & Equipment2,650Accounts
Payable150Truck15,000Total Liabilities13,150Owners'
Equity:Capital Stock8,000Retained Earnings750Total$
21,900Total$ 21,900
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin

19. Now, let’s review how JJ’s transactions affected the accounting
equation.
On May 31, JJ’s purchased gasoline for the lawn mower and the
truck for $50 cash.
3
Sheet1JJ's Lawn Care ServiceBalance SheetMay 31,
2003AssetsLiabilities and Owners' EquityCash$
4,125Liabilities:Accounts Receivable75Notes Payable$
13,000Tools & Equipment2,650Accounts
Payable150Truck15,000Total Liabilities13,150Owners'
Equity:Capital Stock8,000Retained Earnings700Total$
21,850Total$ 21,850
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
3
Sheet1Assets=Liabilities+Stockholders' EquityCash+Accts.
Rec.+Tools & Equip.+Truck=Notes Payable+Accts.

20. Pay.+Capital StockRetained Earnings
Sheet2Assets=Liabilities+Owners' EquityCash+Accts.
Rec.+Tools & Equip.+Truck=Notes Payable+Accts.
Pay.+Capital Stock+Retained EarningsMay 1$ 8,000$
8,000Balances$ 8,000$ 8,000May 2(2,500)$ 2,500Balances$
5,500$ 2,500$ 8,000May 8(2,000)$ 15,000$
13,000Balances$ 3,500$ 2,500$ 15,000$ 13,000$
8,000May 11300$ 300Balances$ 3,500$ 2,800$ 15,000$
13,000$ 300$ 8,000May 18$ 150(150)Balances$ 3,500$
150$ 2,650$ 15,000$ 13,000$ 300$ 8,000May
2575(75)Balances$ 3,575$ 75$ 2,650$ 15,000$ 13,000$
300$ 8,000May 28(150)(150)Balances$ 3,425$ 75$ 2,650$
15,000$ 13,000$ 150$ 8,000May 29750750Balances$
4,175$ 75$ 2,650$ 15,000$ 13,000$ 150$ 8,000$
750May 31(50)(50)Balances$ 4,125$ 75$ 2,650$ 15,000$
13,000$ 150$ 8,000$ 700
Sheet3
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Let’s prepare the Income Statement and Statement of Cash
Flows for JJ’s Lawn Care Service for the month ending May 31,
2003.
These transactions impact the Statement of Cash Flows.
These transactions impact the Income Statement.
3

21. Sheet1Assets=Liabilities+Stockholders' EquityCash+Accts.
Rec.+Tools & Equip.+Truck=Notes Payable+Accts.
Pay.+Capital StockRetained Earnings
Sheet2Assets=Liabilities+Owners' EquityCash+Accts.
Rec.+Tools & Equip.+Truck=Notes Payable+Accts.
Pay.+Capital Stock+Retained EarningsMay 1$ 8,000$
8,000Balances$ 8,000$ 8,000May 2(2,500)$ 2,500Balances$
5,500$ 2,500$ 8,000May 8(2,000)$ 15,000$
13,000Balances$ 3,500$ 2,500$ 15,000$ 13,000$
8,000May 11300$ 300Balances$ 3,500$ 2,800$ 15,000$
13,000$ 300$ 8,000May 18$ 150(150)Balances$ 3,500$
150$ 2,650$ 15,000$ 13,000$ 300$ 8,000May
2575(75)Balances$ 3,575$ 75$ 2,650$ 15,000$ 13,000$
300$ 8,000May 28(150)(150)Balances$ 3,425$ 75$ 2,650$
15,000$ 13,000$ 150$ 8,000May 29750750Balances$
4,175$ 75$ 2,650$ 15,000$ 13,000$ 150$ 8,000$
750May 31(50)(50)Balances$ 4,125$ 75$ 2,650$ 15,000$
13,000$ 150$ 8,000$ 700
Sheet3
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Investments by and payments to the owners are not included on
the Income Statement.
3

22. Sheet1JJ's Lawn Care ServiceIncome StatementFor the Month
Ended May 31, 2003Sales Revenue$ 750Operating
Expense:Gasoline Expense50Net Income$ 700
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
3
Sheet1JJ's Lawn Care ServiceStatement of Cash FlowsFor the
Month Ended May 31, 2003Cash flows from operating
activities:Cash received from revenue transactions$ 750Cash
paid for expenses(50)Net cash provided by operating activities$
700Cash flows from investing activities:Purchase of lawn
mower$ (2,500)Purchase of truck(2,000)Collection for sale of
repair parts75Payment for repair parts(150)Net cash used by
investing activities(4,575)Cash flows from financing
activities:Investment by owners8,000Increase in cash for
month$ 4,125Cash balance, May 1, 2003- 0Cash balance, May
31, 2003$ 4,125
&A
Page &P

23. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Operating activities include the cash effects of revenue and
expense transactions.
3
Sheet1JJ's Lawn Care ServiceStatement of Cash FlowsFor the
Month Ended May 31, 2003Cash flows from operating
activities:Cash received from revenue transactions$ 750Cash
paid for expenses(50)Net cash provided by operating activities$
700Cash flows from investing activities:Purchase of lawn
mower$ (2,500)Purchase of truck(2,000)Collection for sale of
repair parts75Payment for repair parts(150)Net cash used by
investing activities(4,575)Cash flows from financing
activities:Investment by owners8,000Increase in cash for
month$ 4,125Cash balance, May 1, 2003- 0Cash balance, May
31, 2003$ 4,125
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Investing activities include the cash effects of purchasing and
selling assets.

24. 3
Sheet1JJ's Lawn Care ServiceStatement of Cash FlowsFor the
Month Ended May 31, 2003Cash flows from operating
activities:Cash received from revenue transactions$ 750Cash
paid for expenses(50)Net cash provided by operating activities$
700Cash flows from investing activities:Purchase of lawn
mower$ (2,500)Purchase of truck(2,000)Collection for sale of
repair parts75Payment for repair parts(150)Net cash used by
investing activities(4,575)Cash flows from financing
activities:Investment by owners8,000Increase in cash for
month$ 4,125Cash balance, May 1, 2003- 0Cash balance, May
31, 2003$ 4,125
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Financing activities include the cash effects of transactions with
the owners and creditors.
3

25. Sheet1JJ's Lawn Care ServiceStatement of Cash FlowsFor the
Month Ended May 31, 2003Cash flows from operating
activities:Cash received from revenue transactions$ 750Cash
paid for expenses(50)Net cash provided by operating activities$
700Cash flows from investing activities:Purchase of lawn
mower$ (2,500)Purchase of truck(2,000)Collection for sale of
repair parts75Payment for repair parts(150)Net cash used by
investing activities(4,575)Cash flows from financing
activities:Investment by owners8,000Increase in cash for
month$ 4,125Cash balance, May 1, 2003- 0Cash balance, May
31, 2003$ 4,125
&A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Relationships Among Financial Statements
Beginning of period
End of period
Balance Sheet
Balance Sheet
Time
Income Statement
Statement of Cash Flows
3

26. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Forms of Business Organizations
Sole Proprietorship
Partnership
Corporation
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Reporting Ownership Equity in the Balance Sheet
Sole Proprietorship
Partnership
Corporation
Sheet: Sheet1
Owner's equity:
Jill Jones, capital
8000.0
Sheet: Sheet1
Partners' equity
Jill Jones, capital
4000.0
Bill Jones, capital
4000.0
Total partners' equity
8000.0
Sheet1Owners' equityCapital stock$ 7,000Retained
earnings1,000Total stockholders' equity$ 8,000

27. &A
Page &P
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
The Use of Financial Statements by Outsiders
Creditors
Investors
Two concerns:
Solvency
Profitability
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
The Need for Adequate Disclosure
Notes to the financial statements often provide facts necessary
for the proper interpretation of the statements.
Income Statement
Balance Sheet
Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
End of Chapter 2

28. 4
Vagabond Travel Agency
Balance Sheet
December 31, 2002
AssetsLiabilities & Owners' Equity
Cash22,500$ Liabilities:
Notes receivable10,000 Notes payable41,000$
Accounts receivable60,500 Accounts payable36,000
Supplies2,000 Salaries payable3,000
Land100,000 Total liabilities80,000$
Building90,000 Owners' Equity:
Office equipment15,000 Capital stock150,000
Retained earnings70,000
Total300,000$ Total300,000$
Vagabond Travel Agency
Balance Sheet
December 31, 2002
AssetsLiabilities & Owners' Equity
Cash22,500$ Liabilities:
Notes receivable10,000 Notes payable41,000$
Accounts receivable60,500 Accounts payable36,000
Supplies2,000 Salaries payable3,000
Land100,000 Total liabilities80,000$
Building90,000 Owners' Equity:
Office equipment15,000 Capital stock150,000
Retained earnings70,000
Total300,000$ Total300,000$
Vagabond Travel Agency
Balance Sheet
December 31, 2002
AssetsLiabilities & Owners' Equity

29. Cash22,500$ Liabilities:
Notes receivable10,000 Notes payable41,000$
Accounts receivable60,500 Accounts payable36,000
Supplies2,000 Salaries payable3,000
Land100,000 Total liabilities80,000$
Building90,000 Owners' Equity:
Office equipment15,000 Capital stock150,000
Retained earnings70,000
Total300,000$ Total300,000$
Vagabond Travel Agency
Balance Sheet
December 31, 2002
AssetsLiabilities & Owners' Equity
Cash22,500$ Liabilities:
Notes receivable10,000 Notes payable41,000$
Accounts receivable60,500 Accounts payable36,000
Supplies2,000 Salaries payable3,000
Land100,000 Total liabilities80,000$
Building90,000 Owners' Equity:
Office equipment15,000 Capital stock150,000
Retained earnings70,000
Total300,000$ Total300,000$
Vagabond Travel Agency
Balance Sheet
December 31, 2002
AssetsLiabilities & Owners' Equity
Cash22,500$ Liabilities:
Notes receivable10,000 Notes payable41,000$
Accounts receivable60,500 Accounts payable36,000
Supplies2,000 Salaries payable3,000
Land100,000 Total liabilities80,000$
Building90,000 Owners' Equity
Office equipment15,000 Capital stock150,000
Retained earnings70,000
Total300,000$ Total300,000$
JJ's Lawn Care Service

30. Balance Sheet
May 1, 2003
Assets
Cash8,000$ Capital Stock8,000$
Total8,000$ Total8,000$
Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 2, 2003
Assets
Cash5,500$ Capital Stock8,000$
Tools & Equipment2,500
Total8,000$ Total8,000$
Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 8, 2003
Assets
Cash3,500$ Liabilities:
Tools & Equipment2,500 Notes Payable13,000$
Truck15,000 Owners' Equity:
Capital Stock8,000
Total21,000$ Total21,000$
Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 11, 2003
Assets
Cash3,500$ Liabilities:
Tools & Equipment2,800 Notes Payable13,000$
Truck15,000 Accounts Payable300
Total Liabilities13,300$
Owners' Equity:
Capital Stock8,000
Total21,300$ Total21,300$

31. Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 18, 2003
Assets
Cash3,500$ Liabilities:
Accounts Receivable150 Notes Payable13,000$
Tools & Equipment2,650 Accounts Payable300
Truck15,000 Total Liabilities13,300$
Owners' Equity:
Capital Stock8,000
Total21,300$ Total21,300$
Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 25, 2003
Assets
Cash3,575$ Liabilities:
Accounts Receivable75 Notes Payable13,000$
Tools & Equipment2,650 Accounts Payable300
Truck15,000 Total Liabilities13,300$
Owners' Equity:
Capital Stock8,000
Total21,300$ Total21,300$
Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 28, 2003
Assets
Cash3,425$ Liabilities:
Accounts Receivable75 Notes Payable13,000$
Tools & Equipment2,650 Accounts Payable150
Truck15,000 Total Liabilities13,150
Owners' Equity:
Capital Stock8,000
Total21,150$ Total21,150$

32. Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 29, 2003
Assets
Cash4,175$ Liabilities:
Accounts Receivable75 Notes Payable13,000$
Tools & Equipment2,650 Accounts Payable150
Truck15,000 Total Liabilities13,150
Owners' Equity:
Capital Stock8,000
Retained Earnings750
Total21,900$ Total21,900$
Liabilities and Owners' Equity
JJ's Lawn Care Service
Balance Sheet
May 31, 2003
Assets
Cash4,125$ Liabilities:
Accounts Receivable75 Notes Payable13,000$
Tools & Equipment2,650 Accounts Payable150
Truck15,000 Total Liabilities13,150
Owners' Equity:
Capital Stock8,000
Retained Earnings700
Total21,850$ Total21,850$
Liabilities and Owners' Equity
Assets=Liabilities+
Cash+
Accts.
Rec.+
Tools &
Equip.+Truck=
Notes
Payable+
Accts.

33. Pay.+
Capital
Stock+
Retained
Earnings
May 18,000$ 8,000$
Balances8,000$ 8,000$
May 2(2,500) 2,500$
Balances5,500$ 2,500$ 8,000$
May 8(2,000) 15,000$ 13,000$
Balances3,500$ 2,500$ 15,000$ 13,000$ 8,000$
May 11300 300$
Balances3,500$ 2,800$ 15,000$ 13,000$ 300$ 8,000$
May 18150$ (150)
Balances3,500$ 150$ 2,650$ 15,000$ 13,000$ 300$ 8,000$
May 2575 (75)
Balances3,575$ 75$ 2,650$ 15,000$ 13,000$ 300$ 8,000$
May 28(150) (150)
Balances3,425$ 75$ 2,650$ 15,000$ 13,000$ 150$ 8,000$
May 29750 750
Balances4,175$ 75$ 2,650$ 15,000$ 13,000$ 150$ 8,000$
750$
May 31(50) (50)
Balances4,125$ 75$ 2,650$ 15,000$ 13,000$ 150$ 8,000$
700$
Owners' Equity
JJ's Lawn Care Service
Income Statement
For the Month Ended May 31, 2003
Sales Revenue750$
Operating Expense:
Gasoline Expense50
Net Income700$
JJ's Lawn Care Service
Statement of Cash Flows
For the Month Ended May 31, 2003

34. Cash flows from operating activities:
Cash received from revenue transactions750$
Cash paid for expenses(50)
Net cash provided by operating activities700$
Cash flows from investing activities:
Purchase of lawn mower(2,500)$
Purchase of truck(2,000)
Collection for sale of repair parts75
Payment for repair parts(150)
Net cash used by investing activities(4,575)
Cash flows from financing activities:
Investment by owners8,000
Increase in cash for month4,125$
Cash balance, May 1, 2003-
Cash balance, May 31, 20034,125$
JJ's Lawn Care Service
Statement of Cash Flows
For the Month Ended May 31, 2003
Cash flows from operating activities:
Cash received from revenue transactions750$
Cash paid for expenses(50)
Net cash provided by operating activities700$
Cash flows from investing activities:
Purchase of lawn mower(2,500)$
Purchase of truck(2,000)
Collection for sale of repair parts75
Payment for repair parts(150)
Net cash used by investing activities(4,575)
Cash flows from financing activities:
Investment by owners8,000
Increase in cash for month4,125$
Cash balance, May 1, 2003-
Cash balance, May 31, 20034,125$
JJ's Lawn Care Service
Statement of Cash Flows
For the Month Ended May 31, 2003

35. Cash flows from operating activities:
Cash received from revenue transactions750$
Cash paid for expenses(50)
Net cash provided by operating activities700$
Cash flows from investing activities:
Purchase of lawn mower(2,500)$
Purchase of truck(2,000)
Collection for sale of repair parts75
Payment for repair parts(150)
Net cash used by investing activities(4,575)
Cash flows from financing activities:
Investment by owners8,000
Increase in cash for month4,125$
Cash balance, May 1, 2003-
Cash balance, May 31, 20034,125$
JJ's Lawn Care Service
Statement of Cash Flows
For the Month Ended May 31, 2003
Cash flows from operating activities:
Cash received from revenue transactions750$
Cash paid for expenses(50)
Net cash provided by operating activities700$
Cash flows from investing activities:
Purchase of lawn mower(2,500)$
Purchase of truck(2,000)
Collection for sale of repair parts75
Payment for repair parts(150)
Net cash used by investing activities(4,575)
Cash flows from financing activities:
Investment by owners8,000
Increase in cash for month4,125$
Cash balance, May 1, 2003-
Cash balance, May 31, 20034,125$
Owner's equity:
Jill Jones, capital
8,000

36. $
Partners' equity
Jill Jones, capital
4,000
$
Bill Jones, capital
4,000
Total partners' equity
8,000
$
Owners' equity
Capital stock7,000$
Retained earnings1,000
Total stockholders' equity8,000$