Video instructions and help with filling out and completing Why Form 2220 Adjusted

Instructions and Help about Why Form 2220 Adjusted

In this video we will see how to prepare financial statements from adjusted trial balance an adjusted trial balance is a list of all the balances of ledger accounts after the preparation of adjusting entries it ensures the arithmetic accuracy after making the adjustment entries in the records it contains balances of revenues and expenses along with those of assets liabilities and equity as an adjusted trial balance contains all data needed for financial statements the adjusted trial balance is the primary basis for the preparation of financial statements the financial statements comprise the income statement owner's equity statement balance sheet and statement of cash flows the preparation of the income statement is the first step in preparing the financial statements it is prepared to determine the net income of a company in a period to prepare an income statement all incomes and expenses accounts are considered the statement of owner's equity is prepared to find out the closing balance of the owner's equity it is prepared by using the owners capital and drawings accounts and the net income or net loss from the income statement the balance sheet is prepared to know the financial position of a company it is prepared from the asset and liability accounts and the ending owners capital balance as reported in the owner's equity statement a statement of cash flows summarizes information about the cash inflows or receipts and outflows or payments for a specific period of time let's look at an illustration to see how to prepare financial statements from adjusted trial balance the adjusted trial balance of Trillian company is provided we will prepare the income statement statement of owner's equity and balance sheet as of August 31st let's first prepare the income statement the first step in preparing any statement is to record the three title lines the name of the company the title of the statement and the accounting period the two sections of an income statement are revenues and expenses under revenues we have service revenue of $34,000 and rent revenue of 12 thousand nine hundred dollars by adding thirty four thousand dollars and twelve thousand nine hundred dollars we compute the total revenue as forty six thousand nine hundred dollars under expenses we list salaries and wages expense of sixteen thousand two hundred dollars rent expense of thirteen thousand dollars insurance expense of one thousand five hundred dollars supplies expense of one thousand three hundred dollars and depreciation expense of five hundred dollars by adding all expenses we compute the total expenses as thirty two thousand five hundred dollars by deducting the total expenses from the total revenues we arrive at net income of fourteen thousand four hundred dollars next we prepare the statement of owner's equity for the year and at August 31st year two first we list the three title lines the name of the company the title of the statement and the accounting period next we list the line items first we list the beginning owners capital which is sixteen thousand dollars to this we add net income of fourteen thousand four hundred dollars which was calculated while preparing the income statement thus by adding sixteen thousand dollars and fourteen thousand four hundred dollars we arrive at the ending owners capital of thirty thousand four hundred dollars this amount of ending owners capital will be transferred to the liabilities and owner's equity section of the balance sheet finally we prepare the balance sheet for the year ended August 31st year two similar to all other financial statements we first list the three title lines a balance sheet is classified into two major sections assets and liabilities and owner's equity let's first record the assets section under assets we have cash of eleven thousand dollars accounts receivable of twelve thousand five hundred dollars supplies of $1,200 prepaid insurance of three thousand dollars equipment of fifteen thousand dollars and accumulated depreciation of four thousand dollars note that accumulated appreciate is a contra asset account and reduces the asset balance by adding all assets we determine the total assets of the company to be thirty eight thousand seven hundred dollars next we record the liabilities and owner's equity section under liabilities we have accounts payable of six thousand dollars salaries and wages payable of $1,200 and unearned rent revenue at $1100 by adding all liabilities we determine the total liabilities to be eight thousand three hundred dollars under owner's equity we list owners capital of 30 thousand four hundred dollars by adding total liabilities of eight thousand three hundred dollars and owner's equity of thirty thousand four hundred dollars we determine the total liabilities and owner's equity to be thirty eight thousand seven hundred dollars note that the total of assets equals the total of liabilities and owner's equity ensuring the correctness of the balance sheet