Financials income statement

Types of Accountancy The traditional work of accountants has been to prepare balance sheets and income statements. Nowadays, accountants are becoming increasingly concerned with foi ward planning. Modern accountancy can roughly be divided into two branches, financial accountancy and management or cost accountancy. 

Financial accountancy is concerned with stewardship. This involves the preparation of balance sheets and income statements that represent the interest of stockholders and are consistent with existing legal requirements. Taxation is an important element of financial accounting. 

After the balance sheet and the income statement or profit-and-loss account, the funds statement is generally regarded as the most important financial document. However, many financial managers regard a statement showing changes in cash as being of equal importance. 

The Duns Financial Records Plus (DFR) database provides a balance sheet, income statement, and fourteen of the more widely used business ratios for measuring solvency, efficiency, and profitability. DFR also provides industiy norms and percentages that can be used to compare a toller s financial position to that of their... 

A financial report contains two important documents—the balance sheet and the income statement. Two other documents that appear in the financial report are the accumulated retained earnings and the changes in working capital. All these documents are discussed in the following sections using a fictitious company. 

Balance Sheet The balance sheet represents an accounting view of the financial status of a company on a particular date. Table 9-3 is an example of a balance sheet for a company. The date frequently used by corporations is December 31 of any given year, although some companies are now using June 30 or September 30 as the closing date. It is as if the company s operation were frozen in time on that date. The term consolidated means that all the balance sheet and income statement data include information from the parent as well as subsidiary operations. The balance sheet consists of two parts assets are the items that the company owns, and liabilities and stockholders equity are what the... 

Describe and integrate the financial information depicted in a balance sheet and an income statement in community pharmacy practice. 

The three financial reports that are essential to the operation of any organization are the balance sheet, the income statement, and the statement of cash flows (Table 15-1). Please note that several other types of financial... 

It also shows the net income for year 1. It is important to understand that the terms net income and earnings are used interchangeably in financial reports. You will note that the net income for year 1 is 300,000. The balance sheet (Table 15-2) shows retained earnings of 200,000. This is the portion of the net income that the owners have reinvested in the business. Where did the rest ( 100,000) of the net income go It was redistributed among owners as dividends (as depicted in Table 15-4). The connection between the net income value from the income statement and retained earnings from the balance sheet is an example of how these two reports are linked. In this particular example, the details of this linkage can be examined by the statement of retained earnings (Table 15-4). 

When calculating financial ratios at the end of each quarter, keep in mind seasonal factors that may distort the ratio. Firms use different, accepted accounting methods to prepare their balance sheet and income statement. Therefore, it is imperative to understand how the values used in calculating the ratios were obtained. 

Financial reports used in independent pharmacy practice are very similar to those used in chain community pharmacies. Managers in chain community pharmacies pay attention to the same financial ratios and key indicators on balance sheets and income statements. It was with this knowledge that Marco and Diana decided to spend some time with WHP s owner to gain more insight into the preparation and review of financial reports in community pharmacy practice. 

The revenues and expenses from the Daily Plan Payment report are compiled each month and entered into the income statement report (typically by the organization s accountant or bookkeeper, not by the pharmacists themselves). WHP begins its fiscal year on November 1. In addition to the yearly income statement and balance sheet, WHP s accountant prepares a monthly income statement and balance sheet to provide managers with a more precise picture of the financial status of the pharmacy. Before we examine these reports, we have to consider an important point about the preparation of the monthly income statement. 

The revenues on the monthly income statement have to be revised once reimbursements have been received from third-party payers. The reason for making adjustments is that most payers make adjustments to each claim and charge the pharmacy administrative fees. Therefore, the actual amount paid to the pharmacy for prescriptions dispensed is almost always lower than the amount indicated on the Daily Plan Payment report. If the manager fails to revise the revenues, the income statement will show artificially inflated revenue. This can have a number of adverse consequences for a pharmacy including inaccurate financial reports and higher income taxes. In other words, if the revenues are recorded from online adjudications, the pharmacy... 

Budgeted financial statements, often called pro forma financial statements, show how the pharmacy organization s financial statements will appear at a specified time if operations proceed according to plan. Budgeted financial statements include a budgeted income statement, a budgeted balance sheet, and a budgeted statement of cash flows. 

Financial performance An income statement will be developed for the new programs. This will include service revenue, actual or estimated costs of providing the services, and any net profit. 

A control process will address four areas service quality, patient/client satisfaction, financial performance, and service growth. Service quality will be assessed by using a brief report card to evaluate the quality of a sample of the written reports of medication reviews. An annual survey of patient/client satisfaction with the service processes and outcomes will allow evaluation of patient satisfaction. The pharmacy s income statement will be developed to monitor the financial performance of the new programs. This will include service revenue, associated costs, and any net profit. Service growth will be tracked by tabulating the number of service clients and the number of service episodes each month. 

Statements showing the financial condition of the business concern are prepared periodically from the ledger accounts. These statements are presented in the form of balance sheets and income statements. The balance sheet shows the financial condition of the business at a particular time, while the income statement is a record of the financial gain or loss of the organization over a given period of time. 

Prepare the financial statements (income statement, statement of owner s equity, balance sheet, statement of cash flows, etc.). 

Vertical analysis is another strategy employed by accountants to analyze financial statements. When an income statement is used for verhcal analysis, each account in the statement is expressed as a percentage of net sales, i.e., dividing the total amount of any item by the total of net sales. A firm would... 

In a balance sheet, total assets and total liabilities should be used as denominators to determine the percentage of specific assets, liabilities, and owner s equity, respectively. All financial statement users, including shareholders, will exhibit concern because this drop in gross profit may make the firm report a net loss on the current income statement. Table 9.9 illustrates a sample of vertical analysis for a balance sheet. 

Make a list of any critical assumptions that, if left unchecked, could seriously impact your innovation financially. Many of these you have already created for the income statements and operations specs. Include the following ... 

The conventions governing accounting are fairly simple, but their detailed application is complex, requiring many years of study and experience. In this chapter, we acquaint the nonfinancial professional with the basic concepts of financial reporting by using simple examples and by analyzing a typical balance sheet and income statement from a standard company report. 

Financial statements are prepared and presented in INCOME STATEMENT and BALANCE SHEET. 

The income statement may also be known as the statement of profit and loss, the earnings statement, or the statement of operations. It displays the operating activities of a company for the year and may be an indication of company s future performance. A typical statement will show the figures for the current year as well as one or two previous year s activities. Frequently, an annual report will include a 5- or 10-year summary near the end of the report. The term consolidated will appear, indicating that all the financial activities of the company and its subsidiary operations are reported in a single statement (Table 3.9) (5). 

For a broader perspective. Figure 3.3, the financial family tree, ties together the income statement and the balance sheet. The upper part of the figure includes information obtained from the income statement, while the lower part contains information from the balance sheet, namely, total assets and total liabilities. The difference between these two figures is the stockholders equity from which the return on equity can be calculated. The net income found in the income statement divided by the stockholders equity is the return on equity. Figures 3.2 and 3.3, therefore, depict how the income statement and the balance sheet are related. 

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