Balance Sheet and Income Statement

The balance sheet and the income statement have some missing numbers and we are going to find calculate those. Before we start just wanted to clarify what a balance sheet is – A Balance Sheet is a statement of the financial position of a business which states the assets, liabilities, and owners’ equity at a particular point in time (Ward, 2017). And according to the Motley Fool an Income Statement measures a company’s financial performance over a specified period of time. Also known as a profit and loss (P&L) statement, statement of operations, or statement of income, it is one of three major financial statements used by companies to track revenues and expenses. In following pages we are going to find out the missing values and then the following page will contain the explanation and calculation, how I found the value.

Keywords: balance sheet, account statement

 

 

Balance Sheet and Account Statement

ASSETS  
CURRENT ASSETS    
Cash   225,971
Contracts receivables   505,050 A=Total Current Assets – ( Cash+ Other Assets)
Other assets   162,847  
Total current assets   893,868
LONG TERM ASSETS    
Equipment   286,792  B= Total assets – Total current assets
TOTAL ASSETS   1,180,660  
LIABILITIES AND STOCKHOLDERS’ EQUITY    
CURRENT LIABILITIES    
Accounts payable   257,335  C= Total Current Liabilities – ( Line of Credit + Accrued Expenses + Income Tax Payable + Deferred income taxes)
Line of credit   85,000  
Accrued expenses   72,495
Income tax payable   46,660
Current portion of notes payable   31,747
Deferred income taxes   78,460
Total current liabilities   571,697
LONG TERM LIABILITIES    
Notes payable (long term)   172,467
TOTAL LIABILITIES   744,164
STOCKHOLDERS’ EQUITY    
Common stock 62,000  
Additional paid-in capital 63,862  
Retained Earnings 310,634    D= Total Stockholders equity – ( Common Stock + Additional paid in capital)
Total stockholders’ equity   436,496  
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY   1,180,660  E= (Total liabilities + Stockholders equity)

Definition and Explanation of Each Account Line 

  1. Current asset is an item on an entity’s balance sheetthat is either cash, a cash equivalent, or which can be converted into cash within one year (Bragg, 2018). In the given situation. “Total Current Assets” is given and that include “Cash”, “Contracts receivables” and “Other assets”.  Hence “Contracts Receivables” (A) = Total Current Assets – (Cash + Other Assets)
  2. Total Assets include “Total currents assets” and “Long Term Assets” in this case Equipment is only long term assets. Hence , Equipment(B) = Total Assets – Total current assets
  3. Current Liabilities are supposed to be paid off within 1 year, and this includes “Accounts Payable”, “Line of Credit” , “Accrued expenses”, “Income Tax payable”, “Current portion of notes payable” and “Deferred income taxes”. Hence Total Current Liabilities = “Accounts Payable” + “Line of Credit” + “Accrued expenses” +”Income Tax payable” +”Current portion of notes payable” + “Deferred income taxes”.

Therefore : Accounts Payable ( C) = “Total current liabilities – (“Line of Credit” + “Accrued expenses” +”Income Tax payable” +”Current portion of notes payable” + “Deferred income taxes”)

  1. Stockholders Equity = “Common Stock” + Paid in Capital + Retained Earnings

Therefore Retained Earnings (D) = Stockholders Equity – (Common Stock + Paid in Capital)

 

  1. Now for the last point TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (E) , we get the figure by adding “Total Liabilities” which is total of “Current liabilities” and long term liabilities and Total stockholders’ equity

In short TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (E)=  Total Liabilities + Total stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Statement
     
Contract Revenues 5,146,862
   
Contract Costs 4,532,519  Contract Costs ( F) = Contract Revenues – Gross Profit
     
Gross Profit 614,343
   
General and Administrative Expenses 322,356
   
Operating Income 291,987
   
Other Expense 25,770
   
Income Before Provision for Income Taxes 266,217
Provision for Income Taxes 115,450 Provision for Income Taxes (G) = Income Before Provision for Income Taxes – Net Income
     
Net Income 150,767  

Retained Earnings, Beginning Balance (H) = Retained Earning, Ending Balance – Net Income

   
Retained Earnings, Beginning Balance 159,867
     
Net Income 150,767  
     
Retained Earnings, Ending Balance 310,634
   

 

 

 

Definition and Explanation of Each Account Line of Income Statement –

  1. We can calculate, Gross Profit = Contract Revenues – Contract Costs. Hence, Contract Costs ( F) = Contract Revenues – Gross Profit
  2. We can calculate “Net Income” = “Income before Provision for Income Taxes” – “Provision for Income Taxes”(G). Hence, Provision for Income Taxes (G) = Income before Provision for Income Taxes – Net Income
  3. And for the last point the Retained Earnings, Ending Balance = Retained Earnings, Beginning Balance (H) + Net Income. Hence , Retained Earning, Beginning Balance (H) = Retained Earning, Ending Balance – Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Ward, S. (2017, October). Balance Sheet Definition and Examples.

Retrieved from https://www.thebalance.com/balance-sheet-definition-2946947

The Motley Fool. What Is an Income Statement?. Retrieved from https://www.fool.com/knowledge-center/income-statement.aspx

 

Bragg, S. (2018. February). Current Asset. Retrieved from https://www.accountingtools.com/articles/2017/5/4/current-asset

 

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