This chapter discusses preparing financial statements for JJ's Lawn Care Service for the month of May. It covers creating an adjusted trial balance, statements of retained earnings, owner's equity, and cash flows. It also discusses drafting notes to the financial statements, closing temporary accounts, and closing entries to prepare revenue, expense, income summary, and dividends accounts for the next period. The chapter concludes with evaluating the business's profitability, solvency, and efficiency and preparing financial statements for different time periods.
18. After all closing entries are made, JJ’s After-Closing Trial Balance looks like this.
19. Evaluating the Business Did the business earn a profit or loss in the current period? What is the business’s future potential for a profit? Evaluating Profitability Does the business have assets available to pay debts as they are due? Evaluating Solvency
20. Evaluating the Business Are product lines profitable? Are resources being used efficiently? Are production processes efficient? Focusing Management’s Attention
21. Preparing Financial Statements Covering Different Periods of Time Monthly Quarterly Jan. 1 Dec. 31 Annually Many companies prepare financial statements at various points throughout the year. Interim Financial Statements