Accounting 2013 Class Notes: Balance Sheet and Income Statement Vocabulary

E1-3 Preparing a Balance Sheet

• DSW, Inc. balance sheet (as of July 30, 2016) shows assets and liabilities/equity with a missing total Liabilities and Stockholders' Equity.
• Given amounts (thousands):
  • Liabilities: Accounts Payable 314{,}400, Notes Payable 203{,}200
  • Stockholders’ Equity: Common Stock 631{,}400, Retained Earnings 310{,}000
  • Assets: Cash 165{,}800, Accounts Receivable 49{,}000, Inventory 556{,}100, Equipment 688{,}100, Total Assets 1{,}459{,}000
• Compute totals:
  • Total Liabilities = 314{,}400 + 203{,}200 = 517{,}600
  • Total Stockholders’ Equity = 631{,}400 + 310{,}000 = 941{,}400
  • Missing Total Liabilities and Stockholders’ Equity = 1{,}459{,}000
• Answer for financing source: Stockholders’ equity provided more financing than creditors (Equity 941{,}400 vs Liabilities 517{,}600).

E1-5 Labeling and Classifying Business Transactions

• Account Name and Classification options: Accounts Payable, Accounts Receivable, Cash, Common Stock, Dividends, Land, Notes Payable, Sales Revenue, Supplies, Supplies Expense; Classifications: A (Asset), L (Liability), SE (Stockholders’ Equity), R (Revenue), E (Expense).

a. Coins and currency → Account Name: Cash; Classification: A
b. Amounts K-Swiss owes to suppliers of shoes → Account Name: Accounts Payable; Classification: L
c. Amounts K Swiss can collect from customers → Account Name: Accounts Receivable; Classification: A
d. Amounts owed to bank for loan to buy building → Account Name: Notes Payable; Classification: L
e. Property on which buildings will be built → Account Name: Land; Classification: A
f. Amounts distributed from profits to stockholders → Account Name: Dividends; Classification: SE
g. Amounts earned by K Swiss by selling shoes → Account Name: Sales Revenue; Classification: R
h. Unused paper in K Swiss head office → Account Name: Supplies; Classification: A
i. Cost of paper used up during month → Account Name: Supplies Expense; Classification: E
j. Amounts contributed by stockholders for K Swiss stock → Account Name: Common Stock; Classification: SE

E1-6 Preparing an Income Statement and Inferring Missing Values

Cinemark Holdings, Inc. (quarters ended 2016) income statement items (thousands):

• Revenues:

  • Admissions Revenue: 472{,}800
  • Concessions Revenue: 295{,}700
  • Total Revenues: 768{,}500

• Expenses:

  • Concessions Expenses: 41{,}900
  • Film Rental Expenses: 249{,}800
  • Income Tax Expense: 40{,}900
  • Office Expenses: 202{,}900
  • Rent Expense: 82{,}800
  • Salaries and Wages Expense: 84{,}500
  • Total Expenses: 702{,}800

• Net Income: 65{,}700 (computed as 768{,}500 - 702{,}800 = 65{,}700)

• Main source of revenue: Admissions Revenue (largest revenue item: 472{,}800 vs 295{,}700 for concessions)

• Two biggest expenses: Film Rental Expenses, Office Expenses

E1-8 Inferring Values Using the Income Statement and Balance Sheet Equations

Key equations:

• Net Income = Total Revenues − Total Expenses
• Assets = Liabilities + Stockholders' Equity
• Changes: If you know changes in assets and liabilities, you can deduce change in stockholders' equity via ΔA = ΔL + ΔSE.

1) If cash is 35{,}000 and accounts payable is 15{,}000, how much is owner’s equity?

• Using A = L + SE: SE = A − L = 35{,}000 − 15{,}000 = 20{,}000
• Owner’s equity: 20{,}000

2) If assets decreased 20{,}000 and liabilities increased 5{,}000, how much did owner's equity change (increase or decrease)?

• ΔA = −20{,}000, ΔL = +5{,}000
• ΔSE = ΔA − ΔL = (−20{,}000) − 5{,}000 = −25{,}000
• Owner’s equity decreased by 25{,}000

3) During May, ABC Company reported sales of 570{,}000, accounts receivable of 10{,}000, cost of …

• The line is incomplete in the transcript, so the calculation cannot be completed from the given data.

• Note: The Independent Cases ABCDE in the document require solving for missing values using both the income statement (revenues/expenses) and the balance sheet (assets/liabilities/stockholders' equity). The exact numbers to fill are not fully legible here, but the approach is to apply:

  • Net Income = Total Revenues − Total Expenses
  • Balance must satisfy Assets = Liabilities + Stockholders' Equity
  • Use the given totals to solve for the unknowns (often two unknowns per case).