Financial Accounting: An Integrated Statements Approach, 2nd Edition

Fiscal Year

In the Online Solutions’ illustration, operations began on November 1 and the ac-

counting period was for two months, November and December. Janet Moore, the sole

stockholder, decided to adopt a calendar-year accounting period. In future years, the

financial statements for Online Solutions will be prepared for 12 months, ending on

December 31 each year.

The annual accounting period adopted by a business is known as its fiscal year.

Fiscal years begin with the first day of the month selected and end on the last day of

168 Chapter 4 Accounting Information Systems

Exhibit 13

Integrated Financial Statements for Online Solutions

Online Solutions

Balance Sheet

December 31, 2007

Assets  Liabilities Stockholders’ Equity

Accts. Accts. Wages Unearned Capital Retained

Cash Rec. Supplies Pay. Pay. Rent Stock Earnings

•• • • • • • •

•• • • • • • •

•• • • • • • •

$2,065 $2,720 $760 $900 $250 $240 $25,000 $3,205

$29,595 $29,595

Total Assets  Total Liabilities Stockholders’ Equity

⎭⎪⎪⎪⎪⎬⎪⎪⎪⎪⎫ ⎭⎪⎪⎪⎪⎪⎪⎪⎪⎪⎬⎪⎪⎪⎪⎪⎪⎪⎪⎪⎫

Reconciliation

of cash flows from operations

and net income (see appendix

to this chapter)

Online Solutions

Statement of Cash Flows

For Two Months Ending Dec. 31, 2007

Operating act. $ 2, 865

Investing act. (21, 8 00)

Financing act. 21,000

Increase in cash

and Dec. 31 cash

balance $ 2,065

Online Solutions

Income Statement

For Two Months Ending Dec. 31, 2007

Revenues $16, 840

Expenses 9,755

Operating Income $ 7,0 85

Other Income 120

Net Income $ 7,205

Online Solutions

Retained Earnings Statement

For Two Months Ending Dec. 31, 2007

Net income $7,205

Less dividends 4,000

RE, Dec. 31, 2007 $3,205

Exhibit 13 shows the integration of Online Solutions’ financial statements. The rec-

onciliation of net income and net cash flows from operations is shown in the appen-

dix at the end of this chapter.