The Lemonade Stand
Load, Wash, Rinse, Spin, Dry
Past as Prologue
The Income Statement
Statement of Cash Flows
The Balance Sheet
A Delicate Balance: The Adjusting Entries

The GAAP revenue recognition and matching principles require that the revenue from a particular accounting period be matched with expenses that help cause that revenue. That way, external users will have a more accurate picture of profitability.

Table 3-5. Balance sheet
The accrual accounting setup provides for accounts to carry amounts into the future and then peel [...]

The balance sheet is the accounting equation. It lists the firm’s assets, liabilities, and equity as of a specific date. In this respect it’s a position statement rather than flow statement. The balance sheet is the company’s solvency report card. Typically, the date is the end of the firm’s reporting fiscal year. However, computer software [...]

For many years, the accounting profession worked to get a grip on how to report the information contained in the statement of cash flows. In the 1960s, a funds statement was developed to meet the need for public companies to report this information. It languished from lack of attention. It wasn’t until late 1987 that [...]

The generic income statement below contains most of the elements found in a comprehensive income statement for a corporation. There’s certainly enough flexibility in the format to permit additions and subtractions based on the need to communicate business activity. In Chapter 1, we took a simplified approach to the income statement. The full income statement [...]

Financial statements are historical documents. They report the past. Since there’s no way to directly know the future, we use financial statements—past performance—to forecast the future. If the accounting system operates under GAAP and the financial statements are prepared according to GAAP, we can use a variety of forecasting and analysis tools to predict the [...]

Financial statements are a chief end product of sequential steps generally called the accounting cycle. The accounting cycle details a series of repeated procedures on different kinds of data. This stable repetition helps meet the calls for reliability, relevance, and consistency, to tick off just a few of the GAAP mandates.
We’ve already met most of [...]

It’s a hot August afternoon. Dick and Jane open their lemonade stand to catch the coming home from work trade. They get Molly and Tom to mix the lemonade, serve drinks, and collect cash while they drum up customers. Molly’s older brother, James, is in charge of getting the lemonade supplies and helping things go [...]