Transactions must be analyzed and recorded so that financial statements can be prepared. These statements allow users to make decisions with the resulting information. The trial balance contains all your accounts (which is the summary of the results of all your transactions). This video looks at a business' income statement and balance sheet to see how they summarize the events of the business.
- [Instructor] The trial balance contains all … of our accounts, those accounts contain the results … of all of our transactions. … The trial balance contains all of our revenue … and expense accounts, those will go on the income statement … and it contains our asset accounts, … our liability accounts and our owner's equity accounts. … Those will go on the balance sheet. … From the data in the trial balance, … an income statement can be prepared. … The income statement shows our revenues … less our expenses. … In this case, Double K had revenues … of $3,200 and total expenses … of $2,300 giving us a reported net income of $900. … Well, as you can see, an income statement … in and of itself is not hard to prepare. … You simply pull the relevant accounts … from the trial balance. … The hard part as we now know … is analyzing transactions. … Deciding which accounts are involved, … whether those accounts increased or decreased … and by how much. … The ease of preparing an income statement …
- Reviewing financial statements
- Analyzing transactions
- Categorizing transactions
- Obtaining financing and buying equipment
- How revenue and expenses fit in the accounting equation
- Recording the sale of goods or services
- Posting journal entries to accounts
- The accounting cycle: step by step
Skill Level Beginner
1. Review of the Financial Statements
2. Fours Steps in the Bookkeeping Process
3. How Transactions Affect the Accounting Equation
4. The General Ledger
5. Illustration of the First Three Steps in the Accounting Cycle
The role of computers3m 44s
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