Financial Statements for a Sole Proprietorship

Income Statement

The financial statement that reports the net income or net loss for the fiscal period it covers.

Liquidity Ratio

A measure of a business's ability to pay its current debts as they become due and to provide for unexpected needs of cash.

Net Income

Occurs when total revenue is greater than total expenses.

Statement of Changes in Owner's Equity

A financial statement that is prepared to summarize the effects on the capital account of the various business transactions that occurred during the fiscal period.

Balance Sheet

A financial statement that is a report of the final balances in all asset, liability, and owner's equity accounts at the end of the fiscal period.

Current Ratio

The relationship between current assets and current liabilities.

Profitability Ratios

Are used to evaluate the earnings performance of the business during the accounting period.

Current Assets

Assets used up or converted to cash during the normal operating cycle of the business.

Current Liabilities

The debts of the business that must be paid within the next accounting period.

Financial Statements

Reports prepared to summarize the changes resulting from business transactions that have occurred during a fiscal period.

Report Form

The classifications of balance sheet accounts are shown one under the other.

Return on Sales

The ratio used to examine the portion of each sales dollar that represents profit.

Total Expenses

The total costs incurred by a business during a specific period.

Ending Capital

The final balance of the owner's equity account at the end of the fiscal period.

Accounts Payable

Liabilities that represent amounts owed to suppliers or creditors.

Net Loss

The amount by which expenses exceed revenues.

Total Liabilities

The sum of all debts and obligations of a business.

Total Assets

The total value of everything a business owns.

Withdrawals by Owner

The amounts taken out of the business by the owner for personal use.

Service Fees

Revenue earned from providing services.

Accounts Receivable

Amounts owed to a business by its customers for goods or services delivered.

Cash in Bank

The amount of cash held in the bank accounts of the business.

Commissions Revenue

Income earned from commissions on sales.

Computer Equipment

Assets used in the business for computing and data processing.

Rent Expense

The cost incurred for renting property or equipment.

Investment by Owner

Funds contributed to the business by the owner.

Net Income or Net Loss

The final result of revenues minus expenses on the income statement.

Heading

The part of a financial statement that answers the questions: Who?, What?, and When?