Scribd Logo
Upload

Welcome to Scribd!

  • 31 views

    FIN42030 Topic 2a

    Uploaded by

    Yamini Khanna
    The document discusses the income statement. It provides an overview of the income statement and explains that the income statement is concerned with a company's future performance. It also discusses key income statement terms like revenue, expenses, retained earnings, and different expense categories. The document then provides an example of a company called Hipstergift Corp and lists 12 transactions that occurred in January 2022. Students are asked to record the impact of each transaction on the company's assets and claims on assets in a worksheet and prepare the related balance sheet, income statement, cash flow statement and retained earnings statement for Hipstergift Corp for the month.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    FIN42030 Topic 2a

    Uploaded by

    Yamini Khanna
    31 views11 pages
    The document discusses the income statement. It provides an overview of the income statement and explains that the income statement is concerned with a company's future performance. It also discusses key income statement terms like revenue, expenses, retained earnings, and different expense categories. The document then provides an example of a company called Hipstergift Corp and lists 12 transactions that occurred in January 2022. Students are asked to record the impact of each transaction on the company's assets and claims on assets in a worksheet and prepare the related balance sheet, income statement, cash flow statement and retained earnings statement for Hipstergift Corp for the month.

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the income statement. It provides an overview of the income statement and explains that the income statement is concerned with a company's future performance. It also discusses key income statement terms like revenue, expenses, retained earnings, and different expense categories. The document then provides an example of a company called Hipstergift Corp and lists 12 transactions that occurred in January 2022. Students are asked to record the impact of each transaction on the company's assets and claims on assets in a worksheet and prepare the related balance sheet, income statement, cash flow statement and retained earnings statement for Hipstergift Corp for the month.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    31 views11 pages

    FIN42030 Topic 2a

    Uploaded by

    Yamini Khanna
    The document discusses the income statement. It provides an overview of the income statement and explains that the income statement is concerned with a company's future performance. It also discusses key income statement terms like revenue, expenses, retained earnings, and different expense categories. The document then provides an example of a company called Hipstergift Corp and lists 12 transactions that occurred in January 2022. Students are asked to record the impact of each transaction on the company's assets and claims on assets in a worksheet and prepare the related balance sheet, income statement, cash flow statement and retained earnings statement for Hipstergift Corp for the month.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    FIN42030

    Financial Analysis
    The Income Statement

    Dr. Tiffany Thng


    [email protected]
    Overview
     Review of Topic 1

     Part a The Income Statement


    • Hipstergift Example – record events [Download the example!]

     Part b
    • Hisptergift Example – creating Income Statement
    • Stock Markets and Financial Information
    Review of Lecture 1

     Understand the nature of accounting

     Understand the balance sheet as a list of assets and claims upon those assets

     Two types of claim


     Owners
     Non-owners (liabilities)
    Income Statement

    A User Orientation - Implications

     Concern with future performance (other than tax)


    • Forecasts of future performance (esp. cash flows)
    • Regular reports that explain the difference actual and forecast
    Income Statement Paid in Capital
    (Contributed Capital)
    Assets = Liabilities + Owners’ Equity
    Retained Earnings
    Ownership Interest – 2 types
     Arising from capital contributed by owners  Paid in Capital
     Arising from the sale of goods and services OR the payment of dividends  Retained Earnings

    Retained Earnings
     Changes arising from sale of goods and services (G + S)
    • Revenue = increases in owners’ interest from the delivery of goods and services Income/
    Profit/
    • Expenses = decreases in owner’s interest because of the delivery of goods and services
    Earnings
     Changes arising from dividends – not an expense and does not reduce PIC. It’s a liability
    Income Statement?

     Terminology
     Inventory = Stock
     Accounts Receivable = A/R = Debtors
     Accounts Payable = A/P = Creditors
     Cost of Goods Sold Expense = COGS
     Gross Margin = Gross Profit = Revenue less COGS
    Income Statement

    Hipstergift Corp.
    Example
    Hipstergift Corp.
    Hipstergift is an online retailer and wholesaler of great gifts. During January 2022, the following transactions took place:
    1. Goods carried in inventory at 40 were sold for 120; 60 was received in cash, the remainder was on open account;
    2. Accounts receivable of 80 were collected;
    3. Mr. Cyrus Depp has sued the firm for irreversible beard damage arising from the use of a protector mask.
    Hipstergift’s lawyers concluded that the probability of a successful case is remote.  Mr. Depp is seeking $10M;
    4. Depreciation expense of 5 was recognized;
    5. Prepaid expenses related to 1000 deliveries from a courier service. During the month, 100 deliveries were used;
    6. Dividends were paid in cash on January 18;
    7. 500 iTypewriters were purchased on open account at a cost of 50;
    8. Cash in the amount of 10 was used to settle 5 of other liabilities and 5 of accounts payable;
    9. A telephone bill was received for January in the amount of 20;
    10. Salaries of 15 for the month of January were paid in cash;
    11. Dividends of 10 for the month of January were declared.

    Required:
     Using the worksheet provided, record the impact of each of these events on assets and claims upon assets.
     Prepare a balance sheet for Hipstergift as of Jan 31, 2022 (after all events occurred).
     Prepare statements of income, cash flow and retained earnings for the month ended Jan 31, 2022.

    Next topic
    Hipstergift
      Assets Liabilities + Owners’ Equity
    Event Cash A/R Inventory Prepaid PP&E A/P D/P Other PIC Ret. Earn
    BOP 40 60 100 10 170 15 5 20 100 240
    1              

    2              
    3              
    4              
    5              
    6              
    7              
    8              
    9              
    10              
    11
    Total
    Balance Sheet for HSC At 31 Jan 2022
    Hipstergift Assets
    Cash 150
    Accounts Receivable
    40
    Inventory
    Prepayments 110
    PP&E 9
    165
    Claims against Assets 474
    Liabilities
    Accounts Payable
    Dividends Payable
    Other 60
    Equity 10
    Paid in Capital 35
    Retained Earnings

    100
    269
    474
    Next session: Hipstergift Example (part b)
     There are some extra questions in the Worksheets
     By Thursday, you should be familiar with the basics of the Balance Sheet and Income
    Statement!

     Part b
    • Hisptergift Example – creating Income Statement [use the same worksheet & template]
    • Stock Markets and Financial Information

    You might also like