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How to Make Net Income Financial Statements
How to calculate when you have net income instead of net loss
In the income statement, calculate the variable by adding the 2 known numbers or subtracting them. Which one works in the equation?
If you add and plug you get (-500 - a loss) and we have a gain so try the other operation and plug.
See? It doesn work.
This might be it...
Let's try it.
500 in the blank...
The equation is correct and 4,500 is the plug figure.
We know the net income figure from the income statement so let's plug it in where it goes on the cap statement. Look for a line with the same name.
Plug it in. Will this figure drain (reduce) cap or grow (increase) it? Will you add it to capital, beginning or subtract it?
You may skip the net figure calculation for now. Does owner withdrawals increase or decrease cap? Add or subtract?
Net income GROWS our cap and owner withdrawals DRAIN our capital. Our calc is beginning + net income - withdrawals = cap, ending. 4,000 + 500 - 250 = 4,250 ending cap.
Capital, ending = 4,250. Prepare to plug this figure into the balance sheet below. Left side or right?
Find the line in the balance sheet on the right side with the same title.
Plug the capital, ending figure. Now you have the equation on the right side of the balance sheet L + C = Total L + C. L + 4,250 = y. We need a way to determine at least one of the variables. Assets!
Add up the assets.
A = 7,300 so (L + C) = 7,300 also. Plug it in!
Now we know x + 4,250 = 7,300. Calculate the variable and plug to confirm. What did you get??
7,300 - 4,250 = ??
Right! 3,050. Plug back in to the equation: 3,050 + 4,250 = 7,300. Check? Check ! Now to figure the "other" liability. We owe Office Mart 1,000 and we owe a total of 3,050. Add or subtract?
Try both and plug to check your calculation.
Did you get 2,050 for Bluebonnet? Total Liabilities -Office Mart = Bluebonnet. 3,050 - 1,000 = 2,050. Plug that in the Bluebonnet box.
All that's left is to calculate the box we skipped earlier on the cap statement. Ending capital balance - beginning capital balance = net increase or decrease. Did our cap increase or decrease?
It increased by 250. Plug it! You are done!
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