Complete a 4-part assignment that requires you to categorize balance sheet accounts, prepare a balance sheet, prepare an income statement, and analyze items in a financial statement.
Because the balance sheet reflects all journal entries affecting the business since inception, knowledge of the placement of each account is essential to preparing a financial statement. Likewise preparation of the balance sheet, or statement of financial position, is an essential skill and requires the accountant to take information from the accounting system and summarize it in a single location. Generally accepted accounting principles (GAAP) require organizations to prepare both an income statement and a balance sheet. Before the balance sheet can be prepared, the organization’s net income must be determined. Finally, balance sheets do not always balance once they are prepared, and income statements do not always contain correct account data. This can cause havoc across the accounting department and requires the accountant to locate the missing or incorrect data.
By successfully completing this assignment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
Competency 2: Apply accounting cycle strategies to manage business financial events.
Determine the correct balance sheet category for accounts.
Analyze specific financial information from a company’s financial statements.
Competency 3: Prepare financial statements from accounting system data.
Prepare a balance sheet for a company using appropriate financial data.
Prepare a summarized income statement for a company using appropriate financial data.
This assessment includes four parts. Use the templates provided for each part to complete the assessment. All the templates are linked in the Resources under the Required Resources heading. Submit all four templates for this assessment.
Part 1: Categorizing Balance Sheet Account
Accounts are either temporary or permanent, with the temporary ones assigned to revenues and expenses, leaving the permanent ones to reside on the balance sheet. Because the balance sheet reflects all journal entries affecting the business since inception, knowledge of the placement of each account is essential to preparing the statement. Because you have been studying the parts of the balance sheet, this is an opportunity to apply your knowledge to an important piece of the accounting cycle.
Determine the correct balance sheet category for each of the following accounts. Use the assignment 2, Part 1 Template to complete this part of the assessment.
Allowance for uncollectibles.
Income tax payable.
Part 2: Balance Sheet Preparation
Reporting the results of an organization’s business transactions requires the preparation of financial statements that will be shared with both internal and external users of financial data. For this reason, preparation of the balance sheet, or statement of financial position, is an essential skill and requires the accountant to take information from the accounting system and summarize it in a single location. This assessment demonstrates your skill in the preparation of this financial statement.
Use the following account information to prepare the 2011 balance sheet for Blaze Industries. Be sure to use the proper balance sheet format. If you need to research this format, you may wish to start with the suggested materials in the Resources. Use the assignment2, Part 2 Template to complete this part of the assessment.
Wages payable: $880.00.
Common stock: $10,000.00.
Interest payable: $3,600.00.
Retained earnings: $27,520.00.
Accounts receivable: $400.00.
Long-term bonds payable: $150,000.00.
Advances from customers: $460.00.
Prepaid insurance: $830.00.
Accumulated depreciation: $29,100.00.
Part 3: Income Statement Preparation
Generally accepted accounting principles (GAAP) require organizations to prepare both an income statement and a balance sheet. Before the balance sheet can be prepared, the organization’s net income must be determined. This requires the accountant to pull together data from numerous system accounts and other sources of information. In this part of the assessment, demonstrate your skill in putting together the necessary account data and preparing an income statement in good form.
Use the Assessment 2, Part 3 Template to complete Part 3 of the assessment. On the first page of the template is financial data for Southwest Business School. On the second page is a blank income statement. Use the information provided on the first page to prepare the income statement on the second page.
Part 4: Analyzing Items in the Financial Statement
Balance sheets do not always balance once they are prepared, and income statements do not always contain correct account data. This can cause havoc across the accounting department and requires the accountant to locate the missing or incorrect data. Financial statement preparation will be an important skill during this process, as you will discover when you determine the missing amounts in the statement in this part of the assessment.
Use the Assessment 2, Part 4 template to complete Part 4 of the assessment. In each of the two sets of organization financial statement information provided in the template, two items have been omitted. Analyze the financial statements to determine the missing amounts and fill them in on the template to complete the financial statement information. Be sure to show your work in the space provided under the table in the template.
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