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7 Financial Statements
LEARNING OBJECTIVES
1. Restore data from Exercise 6-2. This backup was made on page 202.
2. Explore Sage 50’s Help feature.
3. Print the financial statements.
4. Use drill down to go from the income statement to the general ledger, then
to the original entry window.
5. Complete Bellwether Garden Supply project online at
www.mhhe.com/yacht2017 > Student Edition link.
6. Make an optional backup of Chapter 7, save one Excel file, and save six
PDF files. (The Exercise 6-2.ptb backup includes the data needed for
Chapter 7.)
FINANCIAL STATEMENTS
In Chapter 7, you look at the financial statements. Once journal entries are
recorded and posted, financial statements are calculated. Since business
managers and owners have the primary responsibility for the organization, they
depend on accounting information in the form of financial statements to
understand what is happening. The financial statements reflect the current month
and year-to-date amounts.
205
206 Chapter 7
1. Balance Sheet.
2. Gross Profit by Departments.
3. Income Statement.
4. Statement of Cash Flow.
5. Statement of Retained Earnings.
6. Statement of Changes in Financial Position. Even though current
accounting standards do not require a SCFP, Sage 50 includes it. (Refer to
Read Me on page 221.)
Balance Sheet
Income Statement
The cash flow from operations is roughly the same as income from operations
plus depreciation, depletion, and adjusted for any other operating transactions
that had no effect on cash during the period. The statement of cash flow also
reports cash transactions associated with the purchase or sale of fixed assets
(Investing Activities) and cash paid to or received from creditors and owners
(Financing Activities).
The financial statements work together. The net income (or net loss) from the
income statement is reported on the balance sheet’s capital section. The net
income or net loss is used to update the balance sheet’s capital amount: Capital
Beginning of the Year – Net Loss (or + Net Income) = Total Capital.
The total of all the cash accounts on the Balance Sheet (Petty Cash, Cash on
Hand, Regular Checking Account, Payroll Checking Account, Savings Account,
and Money-Market Fund) is shown as the Cash Balance at End of Period on the
statement of cash flow, $32,060.92. The statement of cash flow uses information
from both the balance sheet and income statement.
The statement of changes in financial position uses information from the income
statement and balance sheet. No single financial statement tells the entire story.
The income statement indicates how much revenue a business has earned during
a specific period of time, but it says nothing about how much of that amount has
or has not been received in cash. For information about cash and accounts
receivable, look at the balance sheet and statement of cash flow.
GETTING STARTED
1. Start Sage 50. Open the sample company, Bellwether Garden Supply -
Student Name.
2. If necessary, restore data from the Exercise 6-2 backup. (This backup was
made on page 202.) Restoring overwrites or replaces an existing file.
To make sure you are starting in the appropriate place in the data (Exercise
6-2.ptb backup) check the Job Profitability Report. The results for Franklin
Botanical Gardens are shown below.
In Chapter 5 on pages 156-157 you used the Help feature to access sample charts
of accounts. Later in Chapter 5, on pages 181-182, you used Sage 50’s Help
feature to learn about security and internal controls. In this chapter, you learn
how to access Sage 50’s Help feature to learn more about financial statements.
1. From the menu bar, click Help > Help. The Sage 50 Help window displays. If
necessary, click on the Index tab.
Select the
Index tab
2. Type balance sheet in the Type in the keyword to find field. Observe that
Balance Sheet is highlighted.
4. If necessary, on the Sage 50 Help title bar click to enlarge the Sage
50 Help window, or scroll down. Link to How Transactions Affect the
Balance Sheet. In the Learn more area, link to Balance Sheet Format, Debit
and Credit, and Measure Income.
You have already used the Reports & Forms menu to print reports. In the steps
that follow you use the Business Status Navigation Center to print financial
statements.
Standard refers to statements that Sage 50 has already set up. As noted in the
Help window, Sage 50 has a feature that allows you to design financial
statements to fit your company’s needs. For example, if you select Financial
Statements from the Reports & Forms menu, reports with a wrench [ ] next
to them are customized forms. Compare your balance sheet with the one
shown on the next two pages. If you printed the report, observe that a line at
the bottom of the reports says “Unaudited – For Management Purposes
Only.”
1. Close the Balance Sheet. In the Find a Report area of the Business Status
Navigation Center, the Category field shows Financial Statements. In the
Report field, select Gross Profit by Departments.
The Departmental Gross Profit Totals report lists the departmental gross
profit totals for the following departments: Aviary, Books, and Equipment.
Departmental Masking
The Departmental Gross Profit report shown above is separated into three
departments: Aviary, Books, and Equipment. A feature included in Sage 50
called masking allows you to departmentalize financial statements. Masking is
the ability to limit information on the report to a single division, department,
location, or type code.
Wildcards make it easy to select a range of account numbers. In Sage 50, the
only valid wildcard character is an asterisk. An asterisk represents any number of
characters. You can filter or mask the information that appears on certain general
ledger reports. This is done by the use of 15 characters that are allowed in the
Account ID field of your general ledger accounts. To see the account masking
option, do this.
1. Select Reports & Forms > General Ledger > highlight Chart of Accounts.
6. Close the Chart of Accounts and the Select a Report or Form window.
1. In the Find a Report area of the Business Status Navigation Center, the
Category field shows Financial Statements. In the Report field > select
<Standard> Income Stmnt.
How to fix? What if your financial statements do not agree? Suggestions follow.
• Determine the difference in the amounts. Is the difference the amount of an entry?
• Display the Audit Trail report for the month(s)/year you have been completing work. A
partial Audit Trail Report is shown in Chapter 5, page 185. Verify amounts. Is an entry
missing or has an entry been recorded twice? If needed, drill down to the original entry.
• You may also find it useful to display the General Ledger Trial Balance and drill down
to specific accounts.
• If needed, restore an earlier backup file and then continue from that point. Refer to the
chart on pages 2-3 for the backups made in Chapters 1-7.
• Display the financial statement again and compare to textbook illustration.
Follow these steps to follow an account balance from the income statement, to
the general ledger, then to the original entry window. This is called drill down.
3. This takes you to the Receive Money window. The original entry for 4
Thistle Bird Seed Mix-6 lb. (AVRY-10140) is shown (19.99 x 4 = 79.96).
Close the Receive Money window to go back to the General Ledger
Account No. 40000-AV.
4. Drill down from one of the Sales Journal (SJ) entries. The Sales/Invoicing
window appears.
5. When you are through using drill down, close the Sales/Invoicing window,
General Ledger, and Income Statement windows.
1. In the Find a Report area of the Business Status Navigation Center, the
Category field shows Financial Statements. In the Report field, select
2. From the Statement of Cash Flow window, click > uncheck Show
Zero Amounts > . If printed, observe that the bottom of the
report says "Unaudited - For Internal Use Only."
Follow the steps on the next page to print the Statement of Changes in Financial
Position.
Sage 50 includes the Statement of Changes in Financial Position even though current
accounting standards require that a statement of cash flow is needed as part of a full set
of financial statements in place of a statement of changes in financial position.
1. Display the financial statement > select . In the Name field, click on the
down-arrow.
2. Select Adobe PDF or Microsoft XPS Document Writer.
You have not added any new data in Chapter 7. If you would prefer to make a
backup, the suggested file name is Chapter 7.ptb. Detailed steps for backing up
data are shown on pages 24-26.
Backing up saves your data to that point in your work. Each time you back up,
use a different file name; for example, the suggested file name at this point is
Chapter 7.ptb. (Sage 50 automatically adds the file extension .ptb to backups.)
Using a unique file name allows you to restore at different points in the data.
Follow these steps to have separate sheets for each financial statement on one
Excel workbook.
Statement, click .
7. On the Copy Report to Excel window, select Add a new worksheet to an
Existing Microsoft Excel workbook. Then, Browse to the location of the
saved file (Chapter 7_Financial Statements.xlsx). Double-click on the
Chapter 7_Financial Statements file (or highlight it and click <Open>).
11. Save the financial statements as PDF files. Use the financial statement's
name, then save. For example, use the file name Chapter 7_Balance
Sheet.pdf, Chapter 7_Income Statement, etc.
Exercise 7-1: Answer the following questions about the balance sheet and
income statement:
Exercise 7-2: Answer the following questions about the statement of cash flow
and the statement of retained earnings:
CHAPTER 7 INDEX