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Principles of Accounting (MGT109-1)
Module 2
FINANCIAL STATEMENTS
Financial statements are records that provide an indication of an individual’s, organization’s, or
business’ financial status
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The basic equation for
computing the resulting net income or net loss is:
Net income (NI) = Revenues (R) – Expenses (E)
Below is proforma income statement
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In a sole
proprietorship, the basic capital equation is:
Capital (C) = Investment (I) + Net Income (NI) – Drawings (D)
Below is proforma equity statement
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S
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The basic accounting equation (as expressed in the balance sheet) is:
Assets (A) = Liabilities (L) + Equity (E)

Principles of Accounting (MGT109-1)
Below is proforma balance
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At the end of
December 2013, the company had the following account balances:
Land
Notes payable
Office supplies
Buildings
Cash
Kramer, capital
Accounts payable

P45,000
20,000
12,480
50,000
10,360
84,840
13,000

Service revenue
Supplies expense
Income tax expense
Rent expense
Kramer, drawing
Interest expense
Salaries and wages

26,000
1,300
1,060
1,500
2,550
900
15,050

Assuming that there is an additional investment of P2,000
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For each
statement, use a three-line heading on the statement that includes (a) the name of the company, (b) the
name of the statement, and (c) the appropriate time period or date

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