Chapter 2

Analyzing Transactions
Accounting, 21st Edition
Warren Reeve Fess

PowerPoint Presentation by Douglas Cloud

Professor Emeritus of Accounting
Pepperdine University

Copyright 2004 South-Western, a division

of Thomson Learning. All rights reserved.
Task Force Image Gallery clip art included in this
electronic presentation is used with the permission of
NVTech Inc.

Some
Some of
of the
the action
action has
has been
been automated,
automated, so
so
click
click the
the mouse
mouse when
whenyou
you see
see this
this
lightning
lightning bolt
bolt in
in the
the lower
lower right-hand
right-hand
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screen. You
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can point
point and
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anywhere on
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screen.

Objectives
Objectives
1. Explain why
accounts
are
used to record
After
studying
this
After
studying
this
and summarize
the
effects
of
transactions
chapter,
you
should
chapter, you should
on financial statements.
be
be able
able to:
to:
2. Describe the characteristics of an account.
3. List the rules of debit and credit and the
normal balances of accounts.
4. Analyze and summarize the financial
statement effects of transactions.

Objectives
Objectives
5. Prepare a trial balance and explain how
it can be used to discover errors.
6. Discover errors in recording
transactions and correct them.
7. Use horizontal analysis to compare
financial statements from different
periods.

Each
Each financial
financial statement
statement
item,
item, called
called an
an account,
account, isis
included
included in
in the
the ledger.
ledger.

A
Agroup
group of
of
accounts
accounts for
for aa
business
business entity
entity isis
called
called aa ledger.
ledger.

A
Alist
list of
of the
the
accounts
accounts in
in aa ledger
ledger
isis called
called aa chart
chart of
of
accounts.
accounts.

Major Account Classifications

Assets
Assets are
are
resources
resources owned
owned
by
by the
the business.
business.

Liabilities
Liabilities are
are debts
debts
owed
owed to
to outsiders
outsiders
(creditors).
(creditors).

Cash
Supplies
Building
Accounts
receivable

Accounts
payable
Notes payable
Wages payable

Major Account Classifications

Liabilities
Liabilities are
are often
often identified
identified
on
the
balance
sheet
by
titles
on
the
balance
sheet
by
titles
Assets
are
Liabilities
are
debts
Assets are
Liabilities are debts
that
include
payable
.
that
include
payable
.
resources
owned
owed
to
outsiders
resources owned
owed to outsiders
by
(creditors).
by the
the business.
business.
(creditors).
Cash
Supplies
Building
Accounts
receivable

Accounts
payable
Notes payable
Wages payable

Major Account Classifications

Owners
Ownersequity
equity
isis the
the owners
owners
right
right to
to the
the
assets
assets of
of the
the
business.
business.
Chris Clark,
Capital
Chris Clark,
Drawing

Revenues
Revenues are
are
increases
increases in
in
owners
ownersequity
equity as
as
aa result
result of
of selling
selling
services
services or
or
products.
products.
Fees Earned
Fares Earned
Commission
Revenue

Expenses
Expenses are
are the
the
using
using up
up of
of assets
assets
or
or consuming
consuming of
of
services
services to
to
generate
generate revenue.
revenue.
Rent Expense
Salary Expense
Utilities
Expense

To
Toassist
assist you
you in
in learning,
learning,
an
an account
account can
can be
be drawn
drawn
to
to resemble
resemble the
the letter
letter T.
T.

The
The T-Account
T-Account
Cash

The
TheT-account
T-account has
has aa title.
title.

The
The T-Account
T-Account
Cash
Left side
debit

The
The left
left side
side of
of the
the account
account isis the
the debit
debit side.
side.

The
The T-Account
T-Account
Cash
Left side
debit

Right side
credit

The
The right
right side
side of
of the
the account
account isis the
the credit
credit side.
side.

The
The T-Account
T-Account
Cash
3,750
4,300
2,900

Typical entries

850
1,400
700
2,900

Balancing
Balancing aa T-Account
T-Account

First,
First, foot
foot
the
the debit
debit
side.
side.

Cash
3,750
4,300
2,900
10,950

850
1,400
700
2,900

Cash
3,750
4,300
Next,
Next, foot
foot the
the
2,900
credit
credit side.
side.
10,950

850
1,400
700
2,900
5,850

Subtract
Subtract total
total credits
credits
Cash from
from total
total debits
debits to
to
obtain
the
account
obtain
the
account
3,750
850
balance.
balance.

5,100

4,300
2,900
10,950

1,400
700
2,900
5,850

Transactions and Balance

Sheet Accounts

(A) On
On November
November 1,
1, Chris
Chris Clark
Clark
(A)
deposits $25,000
$25,000 in
in aa bank
bank account
account
deposits
in the
the name
name of
of NetSolutions.
NetSolutions.
in
Page 1

JOURNAL
Date

Description

2005

1 Nov. 1 Cash
2
3
4

Chris Clark, Capital

Invested cash in NetSolutions.

Post.
Ref.

Debit

Credit

25 000 00
25 000 00

(A) On
On November
November 1,
1, Chris
Chris Clark
Clark
(A)
deposits $25,000
$25,000 in
in aa bank
bank account
account
deposits
in the
the name
name of
of NetSolutions.
NetSolutions.
in

Effects of this entry in the Ledger

Cash
Nov. 1

25,000

Chris Clark, Capital

Nov. 1

25,000

(B) On
On November
November 5,
5,
(B)
NetSolutions bought
bought land
land
NetSolutions
for $20,000,
$20,000, paying
paying cash.
cash.
for
4
5
6

5 Land

20 000 00

Cash

Purchased land for building

site.

9
10

20 000 00

(B) On
On November
November 5,
5,
(B)
NetSolutions bought
bought land
land
NetSolutions
for $20,000,
$20,000, paying
paying cash.
cash.
for

Effects of this entry in the Ledger

Cash
Nov. 1

25,000 Nov. 5

Land
20,000 Nov. 5

20,000

(C) On
On November
November 10,
10, NetSolutions
NetSolutions
(C)
purchased supplies
supplies on
on account
account
purchased
for $1,350.
$1,350.
for
10
11
12
13
14
15
16

10 Supplies
Accounts Payable
Purchased supplies on account.

1 350 00
1 350 00

(C) On
On November
November 10,
10, NetSolutions
NetSolutions
(C)
purchased supplies
supplies on
on account
account
purchased
for $1,350.
$1,350.
for

Effects of this entry in the Ledger

Supplies
Nov. 10

1,350

Accounts Payable
Nov. 10

1,350

(F) On
On November
November 30,
30, NetSolutions
NetSolutions
(F)
paid creditors
creditors on
on account,
account, $950.
$950.
paid
30
31
32
33
34
35
36

30 Accounts Payable
Cash
Paid creditors on account.

950 00
950 00

(F) On
On November
November 30,
30, NetSolutions
NetSolutions
(F)
paid creditors
creditors on
on account,
account, $950.
$950.
paid

Effects of this entry in the Ledger

Cash
Nov. 1
18

25,000 Nov. 525,000

Nov. 30
7,500
30
3,650
30
950

Accounts Payable
950 Nov. 10

1,350

Rules of Debit / Credit Balance

Sheet Accounts
Debits
Asset accounts. Increase (+)
Liability accounts Decrease (-)
Owners equity
(capital) accounts. Decrease (-)

Credits
Decrease (-)
Increase (+)
Increase (+)

Balance Sheet Accounts

ASSETS

LIABILITIES

Asset Accounts

Liability Accounts

Debit for
increases
(+)

Credit for
decreases
(-)

Debit for
decreases
(-)

Credit for
increases
(+)

OWNERS EQUITY
Owners Equity Accounts
Debit for
decreases
(-)

Credit for
increases
(+)

(D) On
On November
November 18,
18, NetSolutions
NetSolutions
(D)
received fees
fees of
of $7,500
$7,500 from
from
received
customers for
for services
services provided
provided ..
customers
14
15
16
17
18
19
20

18 Cash

7 500 00

Fees Earned
Received fees from customers.

7 500 00

(D) On
On November
November 18,
18, NetSolutions
NetSolutions
(D)
received fees
fees of
of $7,500
$7,500 from
from
received
customers for
for services
services provided
provided ..
customers

Effects of this entry in the Ledger

Cash
Nov. 1
18

25,000 Nov. 5
7,500

Fees Earned
25,000

Nov. 18

7,500

(E) Throughout
Throughout the
the month,
month, NetSolutions
NetSolutions
(E)
incurred the
the following
following expenses:
expenses:
incurred
wages, $2,125;
$2,125; rent,
rent, $800;
$800; utilities,
utilities,
wages,
$450; and
and miscellaneous,
miscellaneous, $275
$275 ..
$450;
18
19

30 Wages Expense

2 125 00

20

Rent Expense

800 00

21

Utilities Expense

450 00

22

Miscellaneous Expense

275 00

23
24

Cash
Paid expenses.

3 650 00

(E) Throughout
Throughout the
the month,
month, NetSolutions
NetSolutions
(E)
incurred the
the following
following expenses:
expenses:
incurred
wages, $2,125;
$2,125; rent,
rent, $800;
$800; utilities,
utilities,
wages,
$450; and
and miscellaneous,
miscellaneous, $275
$275 ..
$450;

Effects of this entry in the Ledger

Cash
Nov. 1
18

Wages Expense

25,000 Nov. 525,000

Nov. 30
7,500
30
3,650

Rent Expense
Nov. 30

2,125

Utilities Expense

800

Nov. 30

Miscellaneous Expense
Nov. 30

275

450

In
In every
every entry
entry the
the sum
sum of
of
the
the debits
debits always
always equal
equal
the
the sum
sum of
of the
the credits.
credits.

(G) On
On November
November 30,
30, aa count
count revealed
revealed
(G)
that $800
$800 of
of the
the supplies
supplies inventory
inventory
that
had been
been used.
used.
had
25
26
27

30 Supplies Expense
Supplies

28

Supplies used during

29

November.

30
31

800 00
800 00

(G) On
On November
November 30,
30, aa count
count revealed
revealed
(G)
that $800
$800 of
of the
the supplies
supplies inventory
inventory
that
had been
been used.
used.
had

Effects of this entry in the Ledger

Supplies
Nov. 10

1,350 Nov. 30

Supplies Expense
800 Nov. 30

800

Double-Entry
Double-Entry Accounting
Accounting
Double-entry accounting is based on a simple
concept: each party in a business transaction
will receive something and give something in
return. In bookkeeping terms, what is received
is a debit and what is given is a credit. The T
account is a representation of a scale or
balance.
Scale or Balance

Luca Pacioli
Developer of
Double-Entry
Accounting

T account
Left Side
Receive
DEBIT

Receive
DEBIT

Give
CREDIT

Right Side
Give
CREDIT

Rules of Debit / Credit Income

Statement Accounts
Expense Accounts
Debit for
increases
(+)

Credit for
decreases
(-)

Revenue Accounts
Debit for
decreases
(-)

Credit for
increases
(+)

Income Statement Accounts

Debits
Revenue accounts Decrease (-)
Expense accounts Increase (+)

Credits
Increase (+)
Decrease (-)

Withdrawals
Withdrawals
by
by the
the
Owner
Owner

(H) On
On November
November 30,
30, Chris
Chris Clark
Clark
(H)
withdrew $2,000
$2,000 in
in cash
cash from
from
withdrew
NetSolutions for
for personal
personal use.
use.
NetSolutions
Page 2

JOURNAL
Date

Description

2005

1 Nov. 30 Chris Clark, Drawing

2

Cash

Chris Clark withdrew cash for

personal use.

Post.
Ref.

Debit

Credit

2 000 00
2 000 00

(H) On
On November
November 30,
30, Chris
Chris Clark
Clark
(H)
withdrew $2,000
$2,000 in
in cash
cash from
from
withdrew
NetSolutions for
for personal
personal use.
use.
NetSolutions

Effects of this entry in the Ledger

Cash
Nov. 1
18

Chris Clark, Drawing

25,000 Nov. 525,000

Nov. 30
7,500
30
3,650
30
950
30
2,000

2,000 Nov. 10

1,350

Normal Balances of Accounts

Increase
(Normal Balances)
Balance sheet accounts:
Asset
Liability
Owners Equity:
Capital
Drawing
Income statement accounts:
Revenue
Expense

Decreases

Debit
Credit

Credit
Debit

Credit
Debit

Debit
Credit

Credit
Debit

Debit
Credit

Flow
Flow of
of Business
Business Transactions
Transactions
1

Transaction
authorized

Entry recorded
in journal

Transaction
takes place

Document
prepared

Entry posted to
ledger

System
System to
to Analyze
Analyze Transactions
Transactions
1. Determine whether an asset, a liability,
owners equity, revenue, or expense account
is affected by the transaction.
2. For each account affected by the transaction,
determine whether the account increases or
decreases.
3. Determine whether each increase or decrease
should be recorded as a debit or a credit.

Journalizing
and Posting

Dec. 11 NetSolutions
NetSolutions paid
paid aa premium
premium of
of
Dec.
$2,400 for
for aa comprehensive
comprehensive insurance
insurance
$2,400
policy covering
covering two
two years.
years.
policy
Page 2

JOURNAL
Date

Description

2005

1 Dec. 31 Prepaid Insurance

2

Cash

Paid premium on two-year

policy.

Post.
Ref.

Debit

Credit

2 400 00
2 400 00

Page 2

JOURNAL
Date

Description

2005

1 Dec. 1 Prepaid Insurance

2

Post.
Ref.

Debit

2 400 00

Cash

2 400 00

Paid premium on two-year

policy.
ACCOUNT NO. 15

ACCOUNT Prepaid Insurance

Date
2005

Dec. 1

Item

Credit

Post.
Ref.

Balance
Debit

2 400 00

Credit

Debit

2 400 00

Credit

Page 2

JOURNAL
Date

Description

2005

1 Dec. 1 Prepaid Insurance

2

Post.
Ref.

15

Debit

2 400 00

Cash

2 400 00

Paid premium on two-year

policy.
ACCOUNT NO. 15

ACCOUNT Prepaid Insurance

Date
2005

Dec. 1

Item

Credit

Post.
Ref.

Balance
Debit

2 400 00

Credit

Debit

2 400 00

Credit

Page 2

JOURNAL
Date

Post.

Description

Ref.

2005

1 Dec. 1 Prepaid Insurance

2

15

Debit

2 400 00

Cash

2 400 00

Paid premium on two-year

policy.

ACCOUNT Cash
Date
2005

Nov. 30
Dec. 1

Item

Credit

ACCOUNT NO. 11
Post.
Ref.

Balance
Debit

Credit

Debit

2 000 00

5 900 00

2 400 00

3 500 00

Credit

Page 2

JOURNAL
Date

Post.

Description

Ref.

2005

1 Dec. 1 Prepaid Insurance

2

15

Cash
Paid premium on two-year

policy.

ACCOUNT Cash

2005

Item

Credit

2 400 00

11

Date

Debit

2 400 00

ACCOUNT NO. 11
Post.
Ref.

Balance
Debit

Credit

Debit

Nov. 30

2 000 00

5 900 00

Dec. 1

2 400 00

3 500 00

Credit

Dec. 11 NetSolutions
NetSolutions paid
paid rent
rent for
for December,
December,
Dec.
$800.
$800.

14

1 Rent Expense

52

15

Cash

11

16
17

Paid rent for December.

800 00
800 00

Dec. 11 NetSolutions
NetSolutions receives
receives $360
$360 for
for three
three
Dec.
months rent
rent beginning
beginning December
December 1.
1.
months

14
15

1 Cash

14

Unearned Rent

16

Received advanced payment

17

For three months rent of land.

23

360 00
360 00

Dec. 44 NetSolutions
NetSolutions purchased
purchased office
office
Dec.
equipment on
on account
account from
from Executive
Executive
equipment
Supply Co.
Co. for
for $1,800.
$1,800.
Supply
18
19

4 Office Equipment
Accounts Payable

20

Purchased office equipment on

21

account.

18
21

1 800 00
1 800 00

Dec. 66 NetSolutions
NetSolutions paid
paid $180
$180 for
for aa
Dec.
newspaper advertisement.
advertisement.
newspaper

21
22
23
24

6 Miscellaneous Expense
Cash
Paid for newspaper ad.

59
11

180 00
180 00

Dec. 11
11 NetSolutions
NetSolutions paid
paid creditors
creditors $400.
$400.
Dec.

24
25
26
27

11 Accounts Payable
Cash
Paid creditors on account.

21
11

400 00
400 00

Dec. 13
13 NetSolutions
NetSolutions paid
paid aa receptionist
receptionist and
and
Dec.
part-time assistant
assistant $950
$950 for
for two
two
part-time
weekswages.
wages.
weeks
Page 3

JOURNAL
Date

Description

2005

1 Dec. 13 Wages Expense

2
3
4

Cash
Paid two weeks wages.

Post.
Ref.

51

11

Debit

Credit

950 00
950 00

Dec. 16
16 NetSolutions
NetSolutions received
received $3,100
$3,100 from
from
Dec.
fees earned
earned for
for the
the first
first half
half of
of
fees
December.
December.
5
6
7
8

16 Cash

11

Fees Earned
Received fees from customers.

41

3 100 00
3 100 00

Dec. 16
16 Fees
Fees earned
earned on
on account
account totaled
totaled
Dec.
$1,750 for
for the
the first
first half
half of
of
$1,750
December.
December.
9
10
11
12

16 Accounts Receivable
Fees Earned
Received fees from customers.

12
41

1 750 00
1 750 00

Dec. 20
20 NetSolutions
NetSolutions paid
paid $900
$900 to
to Executive
Executive
Dec.
Supply Co.
Co. on
on the
the $1,800
$1,800 debt
debt owed
owed
Supply
from the
the December
December 44 transaction.
transaction.
from
13
14

20 Accounts Payable
Cash

15

Paid part of amount owed to

16

Executive Supply Co.

21
11

900 00
900 00

Dec. 21
21 NetSolutions
NetSolutions received
received $650
$650 from
from
Dec.
customers in
in payment
payment of
of their
their
customers
accounts.
accounts.
18
19

21 Cash

11

Accounts Receivable

20

Received cash from customer

21

on account.

12

650 00
650 00

Dec. 23
23 NetSolutions
NetSolutions paid
paid $1,450
$1,450 for
for
Dec.
supplies.
supplies.

22

23 Supplies

14

23

Cash

11

24
25

Purchased supplies.

1 450 00
1 450 00

Dec. 27
27 NetSolutions
NetSolutions paid
paid the
the receptionist
receptionist
Dec.
and part-time
part-time assistant
assistant $1,200
$1,200 for
for
and
two weeks
weekswages.
wages.
two
27

27 Wages Expense

51

28

Cash

11

29
30

Paid two weeks wages.

1 200 00
1 200 00

Dec. 31
31 NetSolutions
NetSolutions paid
paid its
its $310
$310 telephone
telephone
Dec.
bill for
for the
the month.
month.
bill

31

31 Utilities Expense

54

32

Cash

11

33
34

Paid telephone bill.

310 00
310 00

Dec. 31
31 NetSolutions
NetSolutions paid
paid its
its $225
$225 electric
electric
Dec.
bill for
for the
the month.
month.
bill
Page 4

JOURNAL
Date

Description

2005

1 Dec. 31 Utilities Expense

2
3
4

Cash
Paid utility bill.

Post.
Ref.

54

11

Debit

Credit

225 00
225 00

Dec. 31
31 NetSolutions
NetSolutions received
received $2,870
$2,870 from
from
Dec.
fees earned
earned for
for the
the second
second half
half of
of
fees
December.
December.
5
6
7
8

31 Cash

11

Fees Earned
Received fees from customers.

41

2 870 00
2 870 00

Dec. 31
31 NetSolutions
NetSolutions earned
earned $1,120
$1,120 on
on
Dec.
account for
for the
the second
second half
half of
of
account
December.
December.
9
10

31 Accounts Receivable
Fees Earned

11

Recorded fees earned on

12

account.

12
41

1 120 00
1 120 00

Dec. 31
31 Chris
Chris Clark
Clark withdrew
withdrew $2,000
$2,000 for
for
Dec.
personal use.
use.
personal

14
15

31 Chris Clark, Drawing

Cash

16

Chris Clark withdrew cash

17

for personal use.

32
11

2 000 00
2 000 00

Trial Balance

NetSolutions
Trial Balance
December 31, 2005
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accounts Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense

2
2
2
2
20
1

065
220
000
400
000
800

00
00
00
00
00
00
900 00
360 00
25 000 00

4 000 00
16 340 00
4 275 00
1 600 00
985 00
800 00
455 00
42 600 00 42 600 00

NetSolutions
Trial Balance
December 31, 2005
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accounts Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense

Balance
Sheet
Items

2
2
2
2
20
1

065
220
000
400
000
800

00
00
00
00
00
00
900 00
360 00
25 000 00

4 000 00
16 340 00
4 275 00
1 600 00
985 00
800 00
455 00
42 600 00 42 600 00

NetSolutions
Trial Balance
December 31, 2005
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accounts Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense

2
2
2
2
20
1

065
220
000
400
000
800

00
00
00
00
00
00
900 00
360 00
25 000 00

Statement
of Owners
Equity
Item

4 000 00
16 340 00
4 275 00
1 600 00
985 00
800 00
455 00
42 600 00 42 600 00

NetSolutions
Trial Balance
December 31, 2005
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accounts Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Supplies Expense
Miscellaneous Expense

2
2
2
2
20
1

065
220
000
400
000
800

00
00
00
00
00
00
900 00
360 00
25 000 00

4 000 00

Income
Statement
Items

16 340 00
4 275 00
1 600 00
985 00
800 00
455 00
42 600 00 42 600 00

Errors that will not cause the

trial balance to be unequal:
1. Failure to record a transaction or to post a
transaction.
2. Recording the same erroneous amount for
both the debit and the credit parts of a
transaction.
3. Recording the same transaction more
than once.
4. Posting a part of a transaction correctly as
a debit or credit but to the wrong account.

Correction of
Errors
Error
1. Journal entry is incorrect
but not posted.

Correction Procedure
Draw a line through the error
and insert correct title or
amount.

Correction of
Errors
Error
1. Journal entry is correct
incorrect
2.
not posted.
but posted
incorrectly.

Correction Procedure
Draw a line through the error
and insert
correct
title or
posted
error
and post
amount.
correctly.

Correction of
Errors
Error
Correction Procedure
3. Journal entry is incorrect Journalize and post a
and posted
correcting entry.

Correcting
Correcting Errors
Errors An
An Example
Example
On May 5, a purchase of office equipment on
account was incorrectly journalized and posted
as shown.

Journal As recorded and posted

Date

Description

May 5 Supplies
Accounts Payable

Debit

12,500

Credit

12,500

What
What would
would be
be the
the necessary
necessary
correcting
correcting entry?
entry?

Correcting
Correcting Errors
Errors An
An Example
Example
On May 5, a purchase of office equipment on
account was incorrectly journalized and posted
as shown.

Journal As recorded and posted

Date

Description

May 5 Supplies
Accounts Payable

Date

Description

May 5 Office Equipment

Debit

12,500

Debit

12,500

Credit

12,500

Credit

Correcting
Correcting Errors
Errors An
An Example
Example
On May 5, a purchase of office equipment on
account was incorrectly journalized and posted
as shown.

Journal As recorded and posted

Date

Description

May 5 Supplies
Accounts Payable

Date

Description

May 5 Office Equipment

Supplies

Debit

12,500

Debit

12,500

Credit

12,500

Credit

12,500

Financial
Financial Analysis
Analysis and
and
Interpretation
Interpretation
Comparing
Comparing an
an item
item in
in aa
current
current statement
statement with
with the
the
same
same item
item in
in prior
prior statements
statements
isis called
called horizontal
horizontal analysis.
analysis.

J Holmes, Attorney-at-Law
Income Statement
For the Year Ended December 31, 2005 and 2006

2006
Fees earned
Operating expenses:
Wages expense
Rent expense
Utilities expense
Supplies expense
Misc. expense
Total operating
expenses
Net income

2005

Increase (Decrease)
Amount Percent

$187,500 $150,000 $37,500 25.0%

$ 60,000 $ 45,000 $15,000 33.3%
15,000
12,000
3,000 25.0%
12,500
9,000
3,500 38.9%
2,700
3,000
(300) (10.0)%
2,300
1,800
500 27.8%
$ 92,500 $ 70,800 $21,700 30.6%
$ 95,000 $ 79,200 $15,800 19.9%

Chapter 2
The
The End
End