Page 156 - Accounting Principles (A Business Perspective)

4. Completing the accounting cycle

as depreciation calculations. The most popular spreadsheet program is Microsoft Excel®. Free
spreadsheet programs are also available from companies such as Google and Zoho.

Preparing financial statements from the work sheet
When the work sheet is completed, all the necessary information to prepare the income statement, statement of
retained earnings, and balance sheet is readily available. Now, you need only recast the information into the

appropriate financial statement format.
The information you need to prepare the income statement in Exhibit 21 is in the work sheet's Income
Statement columns in Exhibit 20.
The information you need to prepare the statement of retained earnings is taken from the Statement of Retained
Earnings columns in the work sheet. Look at Exhibit 22, MicroTrain Company's statement of retained earnings for
the month ended 2010 December 31. To prepare this statement, use the beginning Retained Earnings account
balance (Account No. 310), add the net income (or deduct the net loss), and then subtract the Dividends (Account

No. 320). Carry the ending Retained Earnings balance forward to the balance sheet. Remember that the statement
of retained earnings helps to relate income statement information to balance sheet information. It does this by
indicating how net income on the income statement relates to retained earnings on the balance sheet.
MICROTRAIN COMPANY
Statement of Retained Earnings
For the Month Ended 2010 December 31,
Retained earnings, 2010 December 1 $ —0—
Net income for the December 7,290
Total $ 7,290
Less: Dividends 3,000
Retained earnings, 2010 December 31 $ 4,290
Exhibit 22: Statement of retained earnings
MICROTRAIN COMPANY
Balance Sheet
2010 December 31
Assets
Cash $ 8,250
Accounts receivable 6,200
Supplies on hand 900
Prepaid insurance 2,200
Prepaid rent 800
Interest receivable 600
Trucks $ 40,000
Less: Accumulated depredation 750 39,250
Total assets $ 58,200
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable $ 730
Unearned service fees 3,000
Salaries payable 180
Total liabilities $ 3,910
Stockholders' equity:
Capital stock $ 50,000
Retained earnings 4,290
Total stockholders' equity 54,290
Total liabilities and stockholders' equity $ 58,200
Exhibit 23: Balance sheet

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