Income Statement

for the Month Ended October 31, 2005

Revenue: Rent Income
Expenses: Advertising Expense Salary Expense	40000
Total Expenses		55000
Net Income

If expenses are greater than revenue, the difference (revenue subtracted from expenses) is identified as a net loss. Note that the first money column is used to list more than one item; the second money column is for totals (or a single item) and the results or the business operations for the fiscal period – net income or net loss. Double lines are ruled through both money columns to show a completed statement.

Capital Statement

The next financial statement to be prepared is a capital statement. This shows how owner’s equity has changed during a fiscal period. It starts with the beginning capital account balance. Any changes that occur are then listed. Possible changes in owner’s equity are:

Increases		Decreases
1. additional investments 2. net income for period		1. withdrawals 2. net loss for period

De Van Loc’s capital statement is a simple one; only two items are involved.

De Van Loc Company

Capital Statement

for the Month Ended October 31, 2005

Beginning Balance, Oct. 1, 2005		515 000
Plus: Net Income		145 000
Ending Balance, Oct. 31, 2005		660 000

Following are illustrations of capital statements with more changes (headings are omitted here):

Beginning Balance, Sept. 1, 2005
Plus: Additional Investment
Net Income	250000
Less: Withdrawals	150 000
Net Increase in Capital		200 000
Ending Balance, Sept. 30, 2005		450 000

Another tool for understanding a company's activity is to look at its cash flow. This measures the actual flow of funds - real money – flowing into and out of a company during a given period of time. A company's cash flow factors out all of the accounting tricks and looks at what a company really earned, because it excludes accounting tools such as depreciation.

Task: Prepare a balance sheet for Maria’s Beauty Salon, use the following data:

Assets: Cash $ 1,750

Furniture and Fixures 8,900

Beauty Supplies 600

Liabilities: Regal Laundry 275

Mavelle Corp. 2,500