UNIT #13 - MULTIPLE STEP INCOME STATEMENTS

INITIAL

COMPLETED

INSTRUCTIONS FOR UNIT #13

~ In Unit #12, you were presented with a financial overview of the company. Once the account balances are up to date, the numbers can then be organized in some coherent manner. That overview was to show you the profit or loss, financial balances, and cash affect of transactions. Since spreadsheets have all the "numbers" linked, you can see the complete impact of changes, e.g. increasing sales, costs, accelerating or decelerating cash collections, etc. With technology we have the "real time" impact in full view.

~ When the overview is formally presented to investors, bankers, management, and other interested parties, it's called financial statements. Think of this as a picture or snapshot of the company. There are four financial statements, namely,

~ The income statement, summarizing all the revenue and expenses for a time period.

~ The retained earnings statement, showing the net income, loss, and dividends for the time period.

~ The balance sheet, presenting the financial position of assets, liabilities, and equity at a point in time.

~ The statement of cash flow, showing how the changes in accounts affected cash flow.

~ We'll begin with the income statement. It will be called the Multiple Step Income Statement. This means the revenue and expenses will be organized in categories to help the reader understand what happened. For example, the cost of merchandise bought and sold is a product cost. The utilities to run the office, store, warehouse, etc. are operating expenses. To illustrate that difference, separate categories are used. Specifically,

~ Sales - returns and allowances = net sales,

~ Net sales - cost of merchandise sold = gross margin or profit,

~ Gross margin or profit - operating expenses - operating income or loss,

~ Operating income or loss - other income or expenses = net income before taxes,

~ Net income before taxes - income taxes = net income.

~ Start with Tutorial #13 Initial. You will see a listing of data. Enter the following amounts and you will see them immediately displayed below. Enter these amounts:

~ Wages expense $ 50

~ Depreciation expense 10

~ Salary expense 100

~ Supplies expense 25

~ Rent expense 50

~ Insurance expense 10

~ Income tax expense 50

~ Utilities expense 50

~ Cost of merchandise sold 600

~ Interest income -0-

~ Interest expense -0-

~ Sales 1,000

INSTRUCTIONS FOR UNIT #13

~ As the numbers are entered into the cells, they are immediately displayed in the multiple step format below. You must enter the correct accounts. If you do it correctly, a response of "Correct" will appear on the right. If not, then "Not correct" will appear. If you get a "Not correct" response, it may be do to spacing; look at the formula bar. Essentially, we are looking for you to enter the correct account title in its proper order.

If you don’t know, read the formula bar for the cell in question.

~ Once the data is entered into the proper cell on the statement, a set of ratios are calculated below. They are the cost compliment, gross margin rate, operating income or loss to sales, and return on sales. These percentages allow for comparison with prior years and other companies.

~ Tutorial #13 Completed has the correct responses.