Page 16 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 2: Understanding Corporate Financial Statements

Advertising 8,650 Notes
Telephone 2,700
Travel and Entertainment 2,550
Dues & Subscriptions 1,100
Interest Paid 2,140
Repairs & Maintenance 1,250
Taxes & Licenses 11,700
Total Expenses 133,290
Net Income ` 60,110
2. Retained Earnings Statement: As the name suggests, a retained earnings statement explains
the changes in a company’s retained earnings over the reporting period. It breaks down

changes affecting the account, such as profits or losses from operations, dividends paid,
and any other items charged or credited to retained earnings. A retained earnings statement
is required by Generally Accepted Accounting Principles (GAAP) whenever comparative
balance sheets and income statements are presented. It may appear in the balance sheet, in
a combined income statement and changes in retained earnings statement, or as a separate
schedule.

Example: Written below is a sample of a retained earnings statement.
Quartz Corporation
Statements of Retained Earnings
For the year ending December 31, 2009
Retained earning - January 1, 2009 $400,000
Add: Net income 115,000
$515,000
Less: Dividends 35,000
Retained earnings - December 31, 2009 $480,000

3. Balance Sheet: The balance sheet provides an insight into the financial status of a company
at a particular time. The balance sheet is different in comparison to the other types of
financial statements. Other financial statements are prepared by taking into account the

financial health of the company over a considerable span of time.
Example: Sample Balance Sheet

Sample Balance Sheet
for the Month Ended __________

Assets ` Liabilities `
Cash 15,300 Accounts Payable —
Accounts Receivable 1,000 Equity 600
Supplies 500 Sample Business Plan, Capital 51,200
Land 10,000 Other —
Building 25,000 Total Liabilities —
Total Assets 51,800 Owner’s Equity 51,800

4. Fund-fl ow Statement: Fund Flow Statements can be understood as the summary of a fi rm’s

changes in financial position from one period to another; it is also called a “sources and uses
of funds statement” or a “statement of changes in financial position”. Simply put, it tells

LOVELY PROFESSIONAL UNIVERSITY 11