Financial Accounting: An Integrated Statements Approach, 2nd Edition

The preceding October transactions have been analyzed and entered into a summary

of transactions for October, as shown in Exhibit 6. You should note that the balance

sheet columns of Exhibit 6 begin with the ending balances as of September 30, 2006.

This is because the balance sheet reports the cumulative total of the entity’s assets,

liabilities, and stockholders’ equity since its inception. In other words, as of October 1,

Family Health Care has cash of $5,100, land of $12,000, notes payable of $10,000, capital

stock of $6,000, and retained earnings of $1,100.In contrast, the statement of cash flows

and the income statement report only transactions for the period.

66 Chapter 2 Basic Accounting Concepts

Exhibit 5

Family Health Care Integrated Financial Statements for September

Family Health Care

Balance Sheet

September 30, 2007

Assets  Liabilities  Stockholders’ Equity

Notes Capital Retained

Cash  Land  Payable  Stock  Earnings

••••

••••

••••

$5,100 12,000 $10,000 $6,000 $1,100

$17,100 $17,100

Total Assets  Total Liabilities Stockholders’ Equity

Family Health Care

Statement of Cash Flows

For the Month Ended Sept. 30, 2007

Operating act. $ 2,600

Investing act. (12,000)

Financing act. 14,500

Increase in cash

and Sept. 30 cash $ 5,100

Family Health Care

Retained Earnings Statement

For the Month Ended Sept. 30, 2007

Net income $2,600

Less dividends 1,500

RE, Sept. 30 $1,100

Family Health Care

Income Statement

For the Month Ended Sept. 30, 2007

Revenues $5,500

Expenses 2,900

Net income $2,600

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FINANCIAL STATEMENTS FOR A CORPORATION’S

SECOND PERIOD OF OPERATIONS

Family Health Care’s financial statements for October are shown in Exhibit 7. These

statements were prepared from the integrated financial statement framework shown

in Exhibit 6.

The income statement for October reports net income of $3,220. This is an increase

of $620, or 23.8% ($620/$2,600), from September’s net income of $2,600. This increase

in net income was due to fees increasing from $5,500 to $6,400, a $900, or 16.4%

($900/$5,500), increase from September. At the same time, total operating expenses

Prepare financial state-

ments for a corporation’s

secondperiod of

operations.

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