3 Accounting Toolkit
Making Changes to Account Balances
Jacqueline Gagnon
The Final Result: Statement of Financial Position
T-accounts are a tool that companies use to keep their accounts up to date. But financial information users don’t want to see T-accounts because they are messy and busy. Instead, we take the balances from T-accounts and use these balances to create financial statements. At this point, you are familiar with one of the financial statements: the Statement of Financial Position. So, let’s work on creating this statement from T-accounts. I’ll go first with the Simply Bricks example, and then you can work through Merry Mattresses and Sammy’s Skates.
We only need two bits of information from the T-accounts: the account name from the top of the T-account, and the ending balance which was calculated at the bottom of the T-account. Once we have this information, it’s just a matter of categorizing and sorting the accounts like we did in the previous chapter. Let’s give it a go!
- Simply Bricks (My Turn):
- At the end of April, the owner of Simply Bricks asks us to prepare a Statement of Financial Position. Luckily, we’ve already recorded all April transactions and calculated the ending balance in each account. Create a Statement of Financial Position for Simply Bricks as at 30 April in good form.
Simply Bricks
Statement of Financial Position
As at 30 April 20XX
| Assets | ||
|---|---|---|
| Current Assets: | ||
| Cash | 85,500 | |
| Accounts Receivable | 39,500 | |
| Inventory | 62,000 | |
| Total Current Assets | 187,000 | |
| Total Assets | 187,000 | |
| Liabilities & Equity | ||
|---|---|---|
| Liabilities: | ||
| Current Liabilities: | ||
| Accounts Payable | 32,000 | |
| Total Liabilities | 32,000 | |
| Equity: | ||
| Retained Earnings | 155,000 | |
| Total Liabilities & Equity | 187,000 | |
Good news—it balances with a total of $187,000 on the asset side and $187,000 in liabilities & equity. All done!
Now, your turn again:
After the first one you should check does it balance? The solution is below. Whether you balance or not, take a look to make sure you formatted the statement correctly. Then move on to the next example.