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Step (6) of account cycle

Financial Statement ‫القوائم الماليه‬

Prepare The Income Statement & Statement Of Owner’s Equity & Balance Sheet

Xx Company
Income Statement
For The Year Ended 31/12/20—
Revenue

 Commission Revenue XX
 Repair service revenue XX
 Maintenance Service Revenue XX Xxx

Expensese

 Salaries Expense XX
 Rent Expense XX
 Insurance expense XX
 General Expense XX
 Advertising Expense XX
 Depreciation Expense-Fixed Asset XX
 Office Supplies Expense XX
 Interest Expense XX Xxx

Net Income Or Net Loss Xxxx

Xx Company
statement of Owner’s Equity
For The Year Ended 31/12/20—
Capital, jan.1 Xx
+ Net Income Xx
(-) Net Loss (Xx)
(-) Drawing (Xx)
Capital 31/12/20--- Xxxx

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Statement of financial position = balance sheet

Xx Company
Balance Sheet
At 31/12/20—

Assets Liabilities
A) Current Assets A)Current Liabilities
Cash Xx Accounts Payable Xx
Accounts Receivable Xx Notes Payable Xx
Notes Receivable Xx Loan Payable (9m) Xx
Prepaid Rent Xx Unearned Commission Rev Xx
Prepaid Salaries Xx Unearned Revenue Xx
Office Supplies Xx Total Current Liabilities Xxx
Total Current Asstes Xxxx B) Long Term Liabilities
B) Fixed Assets Mortgage Loan Xx
Furniture Xx Loan payable (3 years) xx
(-)Acc-Depreciation-Furniture (Xx) Total Liabilities Xxxx
Net Furniture Xx
Equipment Xx Owner’s Equity
(-)Acc-Depreciation-Equipment (Xx) Capital 31/12 Xxxx
Net Equipment Xx
Vehicles Xx
(-)Acc-Depreciation-Vehicles (Xx)
Net Vehicles Xx
Total Fixed Assets Xxxx
Total Assets Xxxxx Total Liabilities &Owner’s Equity Xxxxx
Assets= liabilities & owner’s equity ‫للتاكد من صحه االجابه الزم‬

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 Closing Entry
Date Account Title Debit Credit
31/12 1) Revenue ( I/S ‫) من قائمه‬
Commission Revenue XX

Income Summary XX

31/12 2) Expense ( I/S ‫) من قائمه‬

Income Summary Xx

Salaries Expense Xx

Rent Expense Xx

General Expense Xx

Advertising Expense Xx

Depreciation Expense-Fixed Assets Xx

Office Supplies Expense Xx

Interest Expense Xx
Xx
31/12 3) Net Income ( I/S ‫) من قائمه‬
Income Summary Xx

Capital Xx

Or
Net Loss ‫فى حالة الخساره‬
Xx
Capital
Xx
Income Summary
31/12 4)Drawing
Capital Xx

Drawing Xx

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Example (1) Adjusted Trial Balance At Dec 31, 2007
Account Title Debt Credit
Cash 20,000
Accounts Receivable 35,000
Notes Receivable 25,000
Prepaid Rent 1,500
Office Supplies 1,000
Furniture 27,000
Accumulated Depreciation –Furniture 7,200
Vehicles 55,000
Accumulated Depreciation –Vehicles 20,000
Loan Payable (9 Months) 30,000
Accounts Payable 5,200
Notes Payable 10,000
Unearned Commissions 2,000
Interest Payable 1,000
Salaries Payable 2,000
Adam’s Capital 85,000
Adam’s Drawing 4,000
Commissions Revenue 53,000
Salaries Expense 12,000
General Expense 8,000
Advertising Expense 9,000
Rent Expense 3,000
Office Supplies Expense 1,500
Depreciation Expense-Furniture 2,400
Depreciation Expense-Vehicles 10,000
Interest Expense 1,000
Total 215,400 215,400

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Financial Statement
Adam Insurance Agency
Income Statement
For The Year Ended 31/12/2007
Revenue:
 Commission Revenue 53,000

(-) Expenses
 Salaries Expense 12,000
 General Expense 8,000
 Advertising Expense 9,000
 Rent Expense 3,000
 Office Supplies- Expense 1,500
 Depreciation Expense-Furniture 2,400
 Depreciation Expense-Vehicles 10,000
 Interest Expense 1,000

(46,900)

Net Income 6,100

Adam Insurance Agency

Owner’s Equity Statement
For The Year Ended 31/12/2007
Adam’s Capital 85,000
Net Income 6,100
(-) Adam’s Drawing (4,000)

Adam’s Capital 31/12 87,100

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 Adam Insurance Agency
Balance Sheet
At 31/12/2015

Assets Liabilities
A) Current Assets A) Current Liabilities
Cash 20,000 Loan Payable 30,000
Accounts Receivable 35,000 Accounts Payable 5,200
Notes Receivable 25,000 Notes Payable 10,000
Prepaid Rent 1,500 Unearned Commissions 2,000
Office Supplies 1,000 Interest Payable 1,000
Total Current Assets 82,500 Salaries Payable 2,000
B) Fixed Assets Total Current Liabilities 50,200
Furniture 27,000 B)Long Term Liabilities
(-) Accumulated Mortgage Loan -0-
Depreciation- Furniture (7,200) Total Liabilities 50,200
Net Furniture 19,800
Vehicle 55,000 Owner’s Equity
(-) Accumulated Adam, Capital 13/12 87,100
Depreciation- Vehicles (20,000)
Net Vehicles 35,000
Total Fixed Assets 54,800
Total Assets 137,300 Total Liabilities &
Owner’s Equity 137,300

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Closing Entry
Date Account Title Debit Credit
31/12 1) Revenue
Commission Revenue 53,000
Income Summary 53,000
31/12 2) Expenses
Income Summary 46,900
Salaries Expense 12,000
General Expense 8,000
Advertising Expense 9,000
Rent Expense 3,000
Office Supplies- Expense 1,500
Depreciation Expense-Furniture 2,400
Depreciation Expense-Vehicles 10,000
Interest Expense 1,000
31/12 3) Net Income
Income summary 6,100
Adam’s Capital 6,100
31/12 4) Drawing
Adam, Capital 4,000
Adam, Drawing 4,000

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Example (2)
A ten – month loan had been obtained on august 1 for amount of $600,000.
Interest is to be computed at an annual rate of 12% and is payable when the loan is
due. No interest has been paid or recorded yet.
Prepare the
1) monthly adjusting entries
2) annually adjusting entries
3) quarterly adjusting entries of september 30.
4) quarterly adjusting entries of December 31.
Solution
1) Monthly adjusting entries
1
Interest expense = 600,000 × 12% × 12 = 6000
Adjusting entries
Date Account title Debit Credit
Dr: interest expense 6,000
Cr: interest payable 6,000

2) annually adjusting entries 1/8 ___5m___ 31/12

5
interest expense = 600,000 × 12% × 12 = 30,000
adjusting entries
debit : interest expense 30,000
credit: interest payable 30,000

3) quarterly adjusting entries of September 30. 1/8 __2m___ 30/9

2
interest expense = 600,000 × 12% × 12 = 12,000
adjusting entries
debit : interest expense 12,000
credit: interest payable 12,000

4) quarterly adjusting entries of December 31. 30/9 ___3m___ 31/12

3
interest expense = 600,000 × 12% × 12 = 18,000
adjusting entries
debit : interest expense 18,000
credit: interest payable 18,000

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example
total revenue including
repair service revenue 50,000
maintenance revenue 100,000
total expense including
rent expense 30,000
salaries expense 50,000
general expense 10,000

1) net profit = ……….. 150,000 – 90,000 = 60,000

Total revenue = 50,000 + 100,000 = 150,000
Total expense = 30,000 + 50,000 + 10,000 = 90,000

2) closing entries of expenses

a) debit 90,000 b) credit 90,000
c) debit 100,000 d) credit 100,000

3) closing entries of revenue accounts is …….

a) debit 150,000 b) credit 150,000
c) debit 90,000 d) credit 90,000

4) after closing entries of net income, the income summary account is

a) debit 60,000 b) debit 150,000
c) debit 90,000 d) credit 60,000

Example
Capital, jan 1 = 100,000
Total revenue = 180,000
Total expense = 120,000
Drawing 30,000
Capital December 31 is ……………
Solution
Net profit = 180,000 – 120,000 = 60,000
Capital December 31 = 100,000 + 60,000 – 30,000 = 130,000

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Example
Capital, jan 1 = 200,000
Drawing 30,000
Capital, Dec 31 = 250,000
Net profit is …………….
Solution
Net profit = 250,000 + 30,000 – 200,000 = 80,000

Example
Capital, jan 1 80,000
Capital, dec 31 120,000
Drawing 20,000
Expense 25,000
The revenue account is …………………
Solution
Net profit = 120,000+ 20,000 – 80,000 = 60,000
Net profit = revenue – expense
60,000 = revenue – 25,000
Revenue = 60,000 + 25,000 = 85,000

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