Illustration 13: Income statement for Candely
Services for 20X7
Candely
Services
Income Statement
For the Period Ended 20X7 |
|
|
Consulting Revenue |
$ 2,700 |
Interest Revenue |
40 |
Total Revenue |
2,740 |
|
|
Salary Expenses |
(1,400) |
|
|
Net Income |
1,340 |
There is a new element called interest revenue in the income
statement. The interest revenue is the amount we recognized by posting
the adjusting entry on December 31, 20X7.
Illustration 14: Statement of changes in
equity for Candely Services for 20X6
Candely Services
Statement of Changes in Equity
Period Ended 20X7 |
|
|
Contributed Capital |
$ 3,500 |
|
|
Beginning Retained Earnings |
1,300 |
Plus: Net Income |
1,340 |
Less: Distribution |
(500) |
Ending Retained Earnings |
2,140 |
|
|
Total Equity |
$ 5,640 |
While looking at the statement of changes in equity, note that there
have been cash distributions to the owner ($500) in this accounting period.
Illustration 15: Balance sheet for Candely
Services at 20X7 end
Candely Services
Balance Sheet
For the Period Ended 20X7 |
Assets |
|
Cash |
$ 4,800 |
Accounts Receivable |
500 |
Interest Receivable |
40 |
Certification of Deposit |
1,000 |
Total Assets |
6,340 |
|
|
Liabilities |
|
Salaries Payable |
700 |
Total Liabilities |
700 |
|
|
Equity |
|
Contributed Capital |
3,500 |
Retained Earnings |
2,140 |
Total Equity |
5,640 |
|
|
Total Liability and Equity (Claims) |
6,340 |
Two new elements appear in the balance sheet. Interest receivable
is the amount due from the borrower of funds (i.e., from the bank) for
using Mr. Candely's money. Certificate of deposit represents
the initial amount loaned to the bank that will be returned on the maturity
date (May 1, 20X8).
Illustration 16: Statement of cash flows
for Candely Services for 20X7
Candely
Services
Statement of Cash Flows
For the Period Ended 20X7 |
Cash Flows from Operating Activities |
|
Cash Receipts from Revenue |
$ 3,000 |
Cash Payments for Expenses |
(1,200) |
Net Cash Flow from Operating Activities |
1,800 |
|
|
Cash Flows from Investing Activities |
|
Cash Payment to Purchase CD |
(1,000) |
Net Cash Flow from Investing Activities |
(1,000) |
|
|
Cash Flows from Financing Activities |
|
Cash Payments for Distributions |
(500) |
Net Cash Flow from Financing Activities |
(500) |
|
|
Net Increase in Cash |
300 |
Plus: Beginning Cash Balance |
4,500 |
|
|
Ending Cash Balance |
$ 4,800 |
In the statement of cash flows, two new elements are introduced. The
first is the cash outflow that occurred as a result of purchasing the
certificate of deposit. This is a cash flow for investing activities.
The second represents the cash outflow for distributions to the owner,
which is an example of financing activities.
