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How to create financial statements

Create Financial Statements

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Start with income statement. There are only 2 numbers given and we will calculate the 3rd. We only add and subtract so let's try both and see which answer gives us the correct result when we plug in.

Start with income statement. There are only 2 numbers given and we will calculate the 3rd. We only add and subtract so let's try both and see which answer gives us the correct result when we plug in.

Add and get 2150. Plug that into the equation and perform the operation. The - sign is the operator so lets subtract. Plug in and calculate. Is 2150 the correct number to solve?  Nope.

Add and get 2150. Plug that into the equation and perform the operation. The - sign is the operator so lets subtract. Plug in and calculate. Is 2150 the correct number to solve? Nope.

After subtracting and plugging we see that 1150 is the right answer. We have a net loss of $150. Transfer the net loss figure to the capital statement. The name is the same in both statements.

After subtracting and plugging we see that 1150 is the right answer. We have a net loss of $150. Transfer the net loss figure to the capital statement. The name is the same in both statements.

A net loss is a drain on capital so it will reduce the capital total. Subtract a net loss from beginning capital.

A net loss is a drain on capital so it will reduce the capital total. Subtract a net loss from beginning capital.

Owners withdrawals is also a drain on cap. Subtract that amount also.

Owners withdrawals is also a drain on cap. Subtract that amount also.

You can skip the net increase box for now. We will get back to it in a bit.

You can skip the net increase box for now. We will get back to it in a bit.

12,000 - 150 - 400 results in ending cap of $11,450.  Now you can subtract ending minus beginning and find the net change in cap. $11,450 - 12,000 = a net DECREASE in cap of 550.  Plug that in n check

12,000 - 150 - 400 results in ending cap of $11,450. Now you can subtract ending minus beginning and find the net change in cap. $11,450 - 12,000 = a net DECREASE in cap of 550. Plug that in n check

That works in our calculations. The ending cap figure can now be transferred to the balance sheet. Look for the ending cap line in the balance sheet. Left side or right?  (Hint:  think acct equation.)

That works in our calculations. The ending cap figure can now be transferred to the balance sheet. Look for the ending cap line in the balance sheet. Left side or right? (Hint: think acct equation.)

There it is!  Transfer the ending cap figure to the right side of the balance sheet.

There it is! Transfer the ending cap figure to the right side of the balance sheet.

Outstanding. What can we do next?  We know that assets = liabilities + cap so looks like we can plug the total asset figure in on the right side.

Outstanding. What can we do next? We know that assets = liabilities + cap so looks like we can plug the total asset figure in on the right side.

Plug it in!

Plug it in!

Now we know 2 of 3 numbers in one equation on the right.  If x + 11,450 = 12,200 we can calculate x by reverse operation. Subtract the 2 numbers and plug.  12,200 - 11,450 = 750. Plug and confirm.

Now we know 2 of 3 numbers in one equation on the right. If x + 11,450 = 12,200 we can calculate x by reverse operation. Subtract the 2 numbers and plug. 12,200 - 11,450 = 750. Plug and confirm.

Oh yeah.  Now we have 2 out of 3 numbers for another equation on the right side. We know the total liabilities figure and the value of one of the 2 liabilities.  Service Mart plus Bluebonnet = T. L.

Oh yeah. Now we have 2 out of 3 numbers for another equation on the right side. We know the total liabilities figure and the value of one of the 2 liabilities. Service Mart plus Bluebonnet = T. L.

X + 500 = 750. Reverse. 750 - 500 = 250. Plug and confirm.

X + 500 = 750. Reverse. 750 - 500 = 250. Plug and confirm.

So the liability to Service Mart is 250, right? Does 250 + 500 = 750?

So the liability to Service Mart is 250, right? Does 250 + 500 = 750?

Check!

Check!

And 750 + 11,450 = 12,200. Check!

And 750 + 11,450 = 12,200. Check!

So Total Liabilities + Cap = 12,200. And 12,200 is the total of all assets. So does A = L + C?

So Total Liabilities + Cap = 12,200. And 12,200 is the total of all assets. So does A = L + C?

Looks like it.

Looks like it.

I think it is equal. Yay!!

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