Current assets:
Cash………………………..34,000
Accounts receivable ……….80,000
Merchandise inventory…….170,000
Total current assets………...284,000
Plant and equipment:
Equipment………………….40,000
Less: Accumulated
Depreciation……………....(4000)
Total assets……………..…320,000
Current liabilities:
Short-term debt……………….20,000
Accounts payable……………..35,000
Other accrued liabilities…........12,000
Total current liabilities……….67,000
Long-term debt……………….50,000
Total liabilities…...………….117,000
Owner’s equity……………....203,000
Total liabilities
and owners’ equity………......320,000
The income statement or profit and loss statement (P&L) measures the performance of an enterprise. It presents a summary of the revenues and expenses of an entity for a specific period of time, such as а month or a year. The income statement, also called the statement of operations, is like a moving picture of the entity's operations during the period. The income statement holds perhaps the most important single piece of information about a business - its net income, which is revenues minus expenses. If expenses exceed revenues, the result is a net loss for the period.
The statement of owner's equity presents a summary of the changes that occurred in the owner's equity of the entity during a specific time period, such as a month or a year. Increases in owner's equity arise from investments by the owner and net income earned during the period. Decreases result from withdrawals by the owner and from a net loss for the period. Net income or net loss comes directly from the income statement. Investments and withdrawals by the owner are capital transactions between the business and its owner, so they do not affect the income statement.
Another tool for understanding a company's activity is to look at its cash flow. This measures the actual flow of funds - real money - flowing into and out of a company during a given period of time. A company's cash flow factors out all of the accounting tricks and looks at what a company really earned, because it excludes accounting tools such as depreciation.
