Financial Accounting: An Integrated Statements Approach, 2nd Edition

Adjustment 6 (Accrued Fees Earned). This adjustment recognizes that Family Health

Care has provided services to patients that have not yet been billed. Such services are usu-

ally provided near the end of the month. This adjustment is recorded by increasing ac-

counts receivable and fees earned, as shown below.

110 Chapter 3 Accrual Accounting Concepts

Balance Sheet

Assets  Liabilities Stockholders’ Equity

Accts. Prepaid Office Acc. Notes Accts. Wages Unearned Capital Retained

CashRec.Insur.Supp.Equip.Dep.LandPay.Pay.Pay.RevenueStockEarnings

7,730 1,900 7,300 90 8 ,500  160 12,000 16, 800 140 220 1,440 11,000 7,760

750 750

7,730 2,650 7,300 90 8 ,500  160 12,000 16, 800 140 220 1,440 11,000 8 ,510

Statement of Cash Flows

Statement of

Cash Flows

Income

Statement

Income Statement

a6. 750 Fees earned

Balances

a6. Fees earned

Balances

a6.

FINANCIAL STATEMENTS

In Chapter 2, we prepared financial statements for Family Health Care for September

and October. In this section, we describe and illustrate financial statements for

November, using accrual concepts of accounting. These financial statements are shown

in Exhibits 3, 4, 5, and 6. They are based on the summary of transactions and adjust-

ments shown in Exhibit 2.

Income Statement

The income statement is prepared by summarizing the revenue and expense transac-

tions listed under the income statement column of Exhibit 2. The operating income is

Prepare financial state-

ments using accrual

concepts of accounting,

including a classified

balance sheet.

4

Balance Sheet

Assets  Liabilities Stockholders’ Equity

Accts. Prepaid Office Acc. Notes Accts. Wages Unearned Capital Retained

CashRec.Insur.Supp.Equip.Dep.LandPay.Pay.Pay.RevenueStockEarnings

7,730 1,900 7,300 90 8 ,500  160 12,000 16, 800 140 1,440 11,000 7,9 80

220  220

7,730 1,900 7,300 90 8 ,500  160 12,000 16, 800 140 220 1,440 11,000 7,760

Statement of Cash Flows

Statement of

Cash Flows

Income

Statement

Income Statement

a5.220 Wages expense

Balances

a5. Wages exp.

Balances

a5.

The November transactions and adjustments for Family Health Care are summarized

in Exhibit 2.