Parson - Chp 9 Financial Statements for a Sole Proprietorship
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| Financial statements | Are prepared to summarize the changes resulting from business transactions that occur during an accounting period.
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| Income Statement | A report of the net income or net loss for a fiscal period; sometimes called a "profit and loss" statement.
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| Statement of Changes in Owner's Equity | A financial statement prepared to summarize the effects of business transaction on the capital account.
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| Balance Sheet | a report of the balances in all asset, liability, and owner's equity accounts at the end of the period.
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| Report form | A format for preparing the balance sheet in which the classifications of accounts are listed one under another.
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| Ratio Analysis | Involves the comparison of two amounts on a financial statement and the evaluation of the relationship between these amounts.
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| Profitability ratios | Ratios used to evaluate the earning performance of a business during the accounting period.
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| Sales | A revenue account to record the amount of the merchandise sold.
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| Return on sales | The portion of each sales dollar that represents profit. To calculate this ratio, divide net income by sales.
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| Liquidity ratio | The measure of a business's ability to pay its current debts as they become due and to provide for unexpected needs of cash.
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| Current ratio | The relationship between current assets and current liabilities; calculated by dividing the dollar amount of current assets by the dollar amount of current liabilities.
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| Current Assets | Assets that are either used up or converted to cash during the normal operating cycle of the business, usually one year.
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| Current Liabilities | Debts of the business that must be paid within the next accounting period.
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| Quick ratio | A measure of the relationship between short-term assets and current liabilities.
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