Hello in this lecture we're going to continue on our comprehensive problem, we are now going to make the financial statements including the balance sheet, the income statement and the statement of owner's equity. We will be doing so using the adjusted trial balance here. So what we have done up until this point is that we have done the journal entries, we've recorded the journal entries for the month of May, we've recorded those to the general ledger over here, the general ledger was then used to create the trial balance of this being the unadjusted trial balance. We then took those unadjusted trial balances, we did our adjusting entries on this tab. So as of the end of the time period, we adjusted those accounts that need adjustments for the adjusting process to be on an accrual basis from the unadjusted trial balance to the adjusted trial balance. Now we're going to take this adjusted trial balance and create financial statements from We will then take that unadjusted trial balance and we will make financial statements from it.

So we are now on the financial statement tab. We have our unadjusted trial balance here we can See that these numbers are coming from the adjusted trial balance up here in the formula bar. So we're just using the same numbers. And we're going to make the financial statements from that adjusted trial balance. Now the first thing we're going to want to note is that all we are doing is taking the form of balance from one form and basically putting it into another form, we want to realize that since it is in balance in this form, that it must work if we put it in correctly in the other form, we know that it has to work. So therefore when we approach this, we're going to approach it from the idea that it has to work and therefore, if it's not unbalanced, then we're just got to figure out what we did wrong.

It's not that the thing doesn't work. So for example, we know that we're in balance over here because the debits minus the credits equals zero. That's how we know we're in balance. That's how the double entry accounting system is being represented in the trial balance. We see it represented up here, the way we're going to represent it on the financial statements in debt assets equal liabilities plus owner's equity. That is the balance sheet, we can see that we are in balance here.

And here, the assets, of course, the green accounts, liabilities, orange, and equity is all the blue. And so what we're going to do is put this information in the form of this formula anymore, of course, detailed area and form of financial statements. I'm actually going to start off with the balance sheet because the balance sheet to me is really everything. And so I want to see the accounting equation first, and then drill down more on the equity section, which will deal with this account here, you'll see that we already have some totals here, the ending numbers that we're going to come up to our total assets and total liabilities and equity, these two numbers will have to be the same. First thing I want to do is point out that the title of the balance sheet will go here, and we're just going to put may 31.

In this case, I'm going to put the year being 201. And the point there being that there's only one date as of the balance sheet because we're as of a point in time. So even though we've been Working for the month, may 1 through May 31. When we're looking at the end here, in terms of the balance sheet, we only care about the end date, because there is no timeframe. That's where we are as of a point in time. That's what the balance sheet is, when we come down to the income statement, that will be different, we'll have a time range beginning to the end.

So we have our assets, our liabilities and our equity will be down here we'll add the equity accounts down here. And so what we're going to do is put this information over here from the trial balance into the financial statements in a set format. First, I'm going to just start off with the assets and we'll just go down from there. So when we think about assets first, within the asset category, we usually break it out into current assets in our first asset class. And those are going to be assets that are more liquid meaning they're more convertible to cash, and we're going to start off and they're usually in order on the trial balance in that fashion as well. So, cash is a current asset receivables current assets, supplies the current asset, prepaid rent and current assets.

Prepaid insurance office equipment is not so office equipment is going to be a longer lived assets can be larger pieces of equipment that will have a longer life. Note that we put current assets, we put a colon after it, that's going to mean that there's going to be a subcategory of current assets under this section, I'm going to copy from cash down to prepaid insurance, right click, I'm just going to copy that. Once again, you could type it in here, I'm going to copy and paste it. Also note that I've made the format of the financial statements kind of funny that I've kept with the colors here. Hoping that that's somewhat helpful. If you change the color scheme, that's fine as well.

But there's a black background so that the colors stand out more, so I'm going to right click on it, I'm going to paste it 123. Again, if you paste the first one, it's going to change the color back form. And again, there's if you want to change it, that's fine. But if you want it to stay green for the assets and whatnot, then if you paste values that will happen. Now the other thing we usually do, and I'm going to look at some formatting you Have to do the formatting in this particular worksheet. But oftentimes, we will have this indicated by an indentation as well.

So instead of us going in here and double clicking and don't do this and hitting the spacebar to show kind of an indentation, we will then just highlight the cells and indicate the indentation if we so choose by going to the Home tab, alignment group, and if you hit this increase indent, it'll indent within the cell. So now we're saying its current assets. These are all current assets shown by the indentation, and then we're going to put the number of the current assets in the inner column here. Now these entercom although there's two of them does not mean debit and credit. These are not debits and credits. There are no debits and credits on the financial statements.

The whole point of the financial statements is that we're going to show them to people that don't need to know debits and credits. So this just means that we're going to group numbers on the inside and then we're going to sum them out on the outside. So the assets, we're going to group them on the inside can do that. The formula, we're gonna say equals, and I'm just going to go boom, there's the 34. And enter. I'm going to keep doing that equals there's the five, eight.

Could we type them in there? Yes. But again, a formulas would be for useful, because formulas will help you to see if there's an error equals the supplies equals the prepaid rent equals the insurance. Now, if you're wondering, is there a formula? Could we have done that an easier way in Excel? Yes, you could have done that an easier way we could delete this.

And we could highlight that first one, and autofill or copy and paste because these formulas are proportional or relational to each other. So if we put our cursor on this little bar here, we use what's called the autofill. So if you left click on that, and drag down, auto drives it down. And Dr. Phil does the calculation once you let go. And it what it does is it assumes that we want to bring that formula down. And of course we do because that's typically what happens in a normal Excel worksheet.

So that's the one major things kind of weird in Excel that if once you get used to is extremely helpful. Alright, so now we're going to have the total current assets, we're going to say total current assets, enter, I'm going to go off the cell, and then I'm going to go back on it, I'm going to indent this one two times. So I'm going to go up to the Home tab, alignment group, and we're going to increase indent one and two times. So we current assets indicated by colon, indented, then double indent on total, and the total will go out to the outer column. So anytime we have really add things up in one or the other column, this case, we're going to add up these numbers in the outer column. We're gonna do that with our most used function, you have to know that some function, it's going to be the sum function, it's going to be equals s u m, you could just double click on it down here to get the sum function, like so.

And then I usually just highlight it's better to point click for me, the cell range so from here, highlight down to here. And then we could close it off, you don't have to Ctrl Shift to close it, that's going to be the sum function. So we're going to sum the range of, in this case, I five colon, I nine, range of I five to I nine. Now we hit Enter. And it sums that up for us. And of course, all we did if we had the calculator with 43250 plus 580750, plus 160, plus 120, and that's 32 six.

So that's the sum function got to know the sum function, you can also have it here, you can put this sum function up in your quick taskbar, but I must prefer just typing it in there, I think that might actually just be the fastest way to go. We're gonna have another subcategory now because now and we might want to say that we found a home for these, I could highlight these and say, Okay, I'm going to say I found a home for those. Once we find a home for all of these, then we should be in balance if we did it correctly. Alright, so the next category is going to be called profit. Tea, plants and equipments. colon, that's another category.

And then within property plant equipment we're going to have hoop this one we haven't found a home farm and right click on find a home for that, we need to find home for the office equipment and the accumulated depreciation now, that's going to be the second two assets, the next two assets the only two left in the asset green area. So I'm going to copy this one, we'll just copy and both highlight both of them. Right click, copy, then we'll come over here, right click and paste 123. So we've got the office equipment and accumulate depreciation, I'm going to do the same thing. I'm going to indent those by having those highlighted, we're going to go to the Home tab, we're going to go to the alignment group, we're going to increase the indentation. So we're saying this is another group of assets called property, plant equipment, long lived assets and we have the office equipment the accumulated depreciation.

Now note that the human depreciation is a negative number here the credit so on That what that means is it's really the credit half of these two accounts. So we're going to sub categorize those. And this is going to be a decrease to the assets because of that. So over here, we have to indicate that I'm going to indicate it with words. That's the way I usually do it. So in my financial statement would look like this, we're going to say, less to indicate it's a subtraction problem.

And then I'm going to abbreviate accumulated depreciation, just so it's fitting here. So there we have accumulate depreciation, and then the numbers I'm going to say this equals the 14 five. And here, I don't want to have that negative number, even though it could be a negative represent in the fact that it's a subtraction problem. Not a credit in this case, but generally I represented subtraction problem with the word less. So if it's doesn't say less than you add them up. If it says less than you do a subtraction problem.

Some financial statements will be slightly different. Some statements would assume that you know that some statements might put a negative in there. But one way to do that is to put the less in there when it is a subtraction problem in order to take away the credit, then in Excel, instead of selecting equals, I'm going to put negative, and then point to the cell, and enter. So now what it did is it took that sale and it flipped the sign. So another way to look at it if I delete that, and we just said equals this number, and enter, and then I want to say, I want to get rid of that credits, I want to make that a positive number. Well, how can we make something a positive number, I could multiply that times negative one, because anything times negative one will flip the sign.

And then I'm going to represent it as a subtraction problem by saying this minus this. Now, of course, this form the minus negative one, it's kind of long, we don't need to, we don't need to do that in Excel, we could say, well, maybe I just get rid of this minus negative one. And since there's only One number, I want you to take what's in cell f 11. And make it and flip the sign. So if I just put a negative it'll flip the sign, like so. So that's flips the sign.

And if you take that thought one step further than if you instead of hitting equals, if we select negative, then Excel still thinks we're doing a formula, but it's going to basically just think negative equals negative and then point to the cell. 660 negative will now be 660 positive. So we're going to have to flip the sign on all of these credit balances because we don't want credits over here on the financial statements. Okay, so then we're going to have the total total property, plant and equipment and I know it's taken over a little bit there, but I'm going to do that with a formula once again, we're going to say the 14 five minus so make sure you get the minus it's got to go the right way. It's got to be minus this 660 and then we will come up with this third 840, which if I highlight these 213 840, that's correct, we found a home for these two.

Now, I'm going to click on that and highlight those. Now we have accounted for all assets. If I highlight all the green numbers here, it adds up to 66440. And now I'm going to see if that's the case over here in total assets, I'm going to go to the total assets, I'm going to add up just one call, and we only add up one column at a time, this being the outer column being the total current assets plus the total property, plant and equipment. I'm going to do this with the sum function, even though there's blank cells here like this equals s u m. And I'm just going to highlight the blank cells as well as the sales I'm gonna highlight all the way down, and enter. So all we did, of course, was add those two numbers up.

So we're just adding up the 50 260 plus 13840 266 440. And that is the same as if we highlighted these here. If it's not the same, most people mess up by not having In this going the correct way since it's a contra asset. Alright, so then we're going to go over here to the liabilities, liabilities are in this orange area, and we have three of them, we've got accounts payable, we got salaries payable, we've got unearned fee. Now on liabilities, we usually have this convention again as well, we have to current liabilities. And these are going to be liabilities that we're going to have to pay within a year.

Now in this case, they all happen to be current. So we're still going to put current liabilities up here, but we're going to do something a little bit weird, we're just going to call them total liabilities in the subtotal because we have no other liabilities that we have long term liabilities, liabilities that lasts over a year, then we would have total current liabilities and then we would add up the long term liabilities. So let me show you what this looks like. If we have just current liabilities such as we do here, we're going to copy these, we're going to go over here to K five, right click Paste it 123. So instead of pasting this, we're going to paste that 123 and then I'm going to indent those. So I'm on the cell, I'm going to go to the home.

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