ACCT 240 004 9 20 Key Ratio Analysis Net Profit Marin indicates how effective management is at generating profit on each dollar of sales Net Profit Margin Net Income Net Sales Closing the books While balance sheet accounts are permanent go year to year income statements reset by year Closing Entries 1 Transfer net income or loss to retained earnings 2 Establish a zero balance in each of the temporary accounts to start the next accounting period Balance every debit and credit out with the opposite and then have that same effect apply on RE From last class E4 18 from page 208 a Other data not yet recorded at December 31 2011 include a Insurance expired during 2011 4 b Wages payable 5 c Depreciation expense for 2011 8 d Income tax expense 9 a Insurance Expense Expenses 4 Prepaid Insurance 4 b Wage Expense Expenses 5 Wages Payable 5 c Depreciation Expense Expenses 8 Accumulated Depreciation 8 d Income Tax Expense Expenses 9 Income Taxes Payable 9 Adjusted Debit 35 9 2 80 4 See Below 58 188 Adjusted Balances Account Cash Accounts Receivable Prepaid Insurance Machinery Accumulated depreciation Accounts Payable Wages Payable Income Taxes Payable Contributed Capital Retained Earnings Revenues Not Detailed Expenses Below Total General Expenses Debit 32 Insurance Expense 4 Wage Expense 5 Depreciation Expense 8 Income Tax Expense 9 Total 58 Adjusted Credit 8 9 5 9 73 84 188 For balance sheets including EPS Earnings per share Net Income Avg number of shares outstanding during the period Statement of Stockholder s Equity Contributed Capital Retained Earnings SE Income Statement Revenues 84 Expenses General Expenses Debit 32 Insurance Expense 4 Wage Expense 5 Depreciation Expense 8 Total 49 Operating income 84 49 35 0 for other items 35 income before taxes 9 26 Net Income Retained Earnings Beginning RE 0 Net Income 26 Dividends 4 Ending 22 CC RE SE 73 22 95 Balance Sheet A L SE Assets Account Cash Accounts Receivable Prepaid Insurance Machinery Accumulated depreciation Total 118 Adjusted Debit 35 9 2 80 Adjusted Credit 8 Liabilities Accounts Payable Wages Payable Income Taxes Payable Total 23 Stockholder s Equity CC RE Total SE Total SE L Now Revenue 84 73 22 95 118 Insurance x 4 Wage x 5 Depreciation x 8 Other x 32 Income Tax x 9 Retained Earnings 26 to balance out debit and credit Book Excersise AP 4 7 a Remaining Expenses Depreciation Expense 3000 Accumulated Depreciation 3000 b Insurance Expense 450 Prepaid Insurance 450 c Wage Expense Expenses 2100 Wages Payable 2100 d Supplies Expense 1300 800 500 Supplies 500 e Income Tax Expense 3150 Income Tax Payable 3150 Account Titles Cash Accounts Receivable Supplies Prepaid Insurance Equipment Debit 19 600 7000 800 450 27000 9 5 9 Credit 15 000 2500 2100 3150 5000 16000 10 300 48 000 102050 Accumulated Depreciation Other Assets Accounts Payable Wages Payable Income Tax Payable Notes Payable Contributed Capital Retained Earnings Service Revenue Remaining Expenses Income Tax Expense Totals 5100 38 950 3150 102050 Sothbern Repair Service Income Statement For the Period Ending Dec 31st 2011 Service Revenue Op Expenses Op Income 48 000 38 950 9050 Income Before Tax 9050 Income Tax Expense 3150 Net Income 5900 Statement of RE Beginning RE 10 300 Net Income 5900 Dividends 0 Ending RE 16200