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Business LibreTexts

1.9: Summary of balance sheet and income statement transactions

  • Page ID
    41723
  • Part A of Exhibit 4 summarizes the effects of all the preceding transactions on the assets, liabilities, and stockholders’ equity of Metro Courier, Inc., in July. The beginning balances are the ending balances in Part A of Exhibit 2. The summary shows subtotals after each transaction; these subtotals are optional and may be omitted. Note how the accounting equation remains in balance after each transaction and at the end of the month.

    The ending balances in each of the columns in Part A of Exhibit 4 are the dollar amounts in Part B and those reported earlier in the balance sheet in Part C of Exhibit 3. The itemized data in the Retained Earnings column are the revenue and expense items in Part C of Exhibit 4 and those reported earlier in the income statement in Part A of Exhibit 3. The beginning balance in the Retained Earnings column (USD 0) plus net income for the month (USD 2,100) is equal to the ending balance in retained earnings (USD 2,100) shown earlier in Part B of Exhibit 3. Remember that the financial statements are not an end in themselves, but are prepared to assist users of those statements to make informed decisions. Throughout the text we show how people use accounting information in decision making.