Jacksonville CPA | Preparing For The Next Financial Period
Hello, welcome to the podcast. This is Brandon Mackleroy. I’m the president of a Neva Jacksonville based tax and accounting firm. If you have a Jacksonville CPA or if you don’t have a Jacksonville CPA and you need help growing a business or doing your bookkeeping, your attacks, fulfilling your tax needs and give us a call and we will be happy to help you. So today we’re just going through an accounting lecture, um, of just the basic accounting terms and um,
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then phrases you need to be familiar with and, and how to understand debits and credits and all that good stuff. So, um, enjoy this and I’m hope you learned something
for the entire year. I so notice how the revenue keeps increasing throughout the year at the end of the year. My vertical access right here, the x access, if I remember correctly, is your dollars and your horizontal or why access is time. Okay. So we add up all the revenues throughout the year. We add up all the expenses throughout the year. And then on the income statement is revenue minus expense equals net income or net loss. If revenues exceed expenses as they did in this example. And hopefully that’s normally the case, then you have net income. If expenses are greater than revenues, you would have a net loss. Now notice at the end of December 30, first one, we add up revenues and expenses. We prepare our financial statements and then notice the beginning of the next time period, we start out at zero zero. And for the next period we do the same thing. We add up all the revenues, we add up all the expenses, we determined if we have net income or a net loss. And that’s what we do each time period. We set revenues and expenses back to zero so we can begin a new time period. I like to compare it to a ballgame. Okay? If the Lakers are playing the New York Knicks and they’d beat them one, oh, five to one. Oh four than they win the game tomorrow night the Lakers play the Miami Heat.
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So if you’re a small business owner and uh, you don’t have a Jacksonville CPA or someone to help you grow your business, then give them a Neva a call.
Okay? And they begin zero, zero. They’ve set the score back zero. It’s a new time period. It’s a new ballgame. Okay? Same thing with your paycheck. Think about your paycheck. You see the current amount you’ve earned and you see year to date information while your last page in December, we’ll show you your current amount for the pay period, plus what you’ve earned for the entire year. The very next paycheck in January, you’ll see current and year to date of the to say numbers because they’ve set everything back to zero. And that’s what the income statement does. Now, the balance sheet is different. The balance sheet which we prepare after the income statement after the retained earnings statement says it is now 5:00, December 30. First our businesses closed. The year is over and we want to know how much do we have in assets, how much do we have in liabilities, and what do we have in stock holders?
Equity? Okay? So we’re kind of calling a time out, I call it a freeze frame, we’re taking a picture or a snapshot of what we have and on the board, I’m not going to walk over here, but remember we saw assets, liabilities, and stockholders’ equity. That’s our balance sheet and what we’re going to see is that we prepare the income statement first. Revenue minus expenses equals net income, that net income number, which is the summary of revenues and expenses, is then going to be put into the retained earnings statement and we’re gonna update, retained earnings, and we’re going to go, we’re going to show what we had at the beginning of the year, January first, Jacksonville CPA we’re going to add net income which came from the income statement. We will subtract any dividends paid back to the owners. That will give us our ending retained earnings as of December 30.
First it is the ending retained earnings at the end of the period, which will then ultimately show up on the balance sheet in the holders equity portion of the balance sheet. Okay, so notice revenues minus expenses equals net incomes that falls down into our retained earnings statement, beginning retained earnings plus net income minus dividends equals ending retained earnings, and that drops down ultimately onto the balance sheet. So everything that takes place in our business is ultimately reflected in the balance sheet and we look at the balance sheet at a moment in time, the end of the day, December 30, first end of the time period. Okay, so the income statement measures performance over a time period in months.
So income statement, balance sheet, all these nice terms that we’re learning. I’m definitely things you need to know if you’re trying to run a small business. So if your Jacksonville CPA is not giving you the information you need to run and grow your business, then by all means, reach out to us and schedule a free consultation and see if whether or not we would be a good fit. Anyways, back to the lecture and learning more about accounting
a year. And then we take that summary, which is net income or net loss, and ultimately it ends up on the balance sheet and at the end of each period, December 30, first, uh, one we say timeout. Let’s take a snapshot of our balance sheet to see what our assets, resources, liabilities, obligations, and stockholders’ equity, what’s left for the owner as a result of running this business.
Okay.
What I’d like to do is using this example on the slide, we’re going to build the financial statements. Okay. And so I would like to ask you to break out a piece of paper and something to write with and we’re going to take this data on the board and we’re going to prepare the financial statements. Okay? So let’s read this together. On June first, Eckersley service company was started with an investment of 26,200. Okay? Jacksonville CPA so that would go into our common stock account. Here are the assets and liabilities of the company on June 30th and the revenues and expenses for the month of June. It’s first month of operations. And they give us all these various accounts. They are not in any particular order. In June, the company issued no additional common stock, but they paid a dividend of $2,000, completed income statement and retained earnings statements for the month of June. Okay? Notice that’s covering a time period in this case, one month and a balance sheet at or as of the end of the period of June 30th, 2010. Okay, so I’m going to head over to the board and we’re first gonna. Prepare the inconceivable.
So if you have a Jacksonville CPA that is not meeting your business needs, helping you grow your business, then give your neighbor a call.
Right now. This is what eckers leaks company. We’ll just say ABC company. It doesn’t make a difference in the name of the company. The time period that this was June 30th and I’m just going to put x x for whatever the end of the year is and this is our income statement. Okay? We call this the heading or the header of the financial statements. Okay? Now we’ll keep the camera on the board here, but I may disappear briefly while I’m looking at the information. I will be back momentarily, we look at revenues minus expenses and we get net income. Okay, so on revenues we see 7,011. Let’s just make sure there’s only one or red one revenue account. Maybe there’s more, but I don’t really see any other revenue accounts. So my revenue is $7,000. Okay. Then I looked for my expenses and at this early stage in the game, it doesn’t matter what order you put them in, so we’ll just pull up, put them in the order that we see them. I see advertising expense for 400.