# Ch 5: Preparing Financial Statements: Help and Review

### About This Chapter

## Who's it for?

Anyone who needs help learning or mastering college financial accounting material will benefit from taking this course. You will be able to grasp the subject matter faster, retain critical knowledge longer and earn better grades. You're in the right place if you:

- Have fallen behind in understanding adjusting accounts or working with the preparation of financial statements.
- Need an efficient way to learn about adjusting accounts and preparing financial statements.
- Learn best with engaging auditory and visual tools.
- Struggle with learning disabilities or learning differences, including autism and ADHD.
- Experience difficulty understanding your teachers.
- Missed class time and need to catch up.
- Can't access extra accounting learning resources at school.

## How it works:

- Start at the beginning, or identify the topics that you need help with.
- Watch and learn from fun videos, reviewing as needed.
- Refer to the video transcripts to reinforce your learning.
- Test your understanding of each lesson with short quizzes.
- Submit questions to one of our instructors for personalized support if you need extra help.
- Verify you're ready by completing the Adjusting Accounts and Preparing Financial Statements chapter exam.

## Why it works:

**Study Efficiently:**Skip what you know, review what you don't.**Retain What You Learn:**Engaging animations and real-life examples make topics easy to grasp.**Be Ready on Test Day:**Use the Adjusting Accounts and Preparing Financial Statements chapter exam to be prepared.**Get Extra Support:**Ask our subject-matter experts any relevant question. They're here to help!**Study With Flexibility:**Watch videos on any web-ready device.

## Students will review:

In this chapter, you'll learn the answers to questions including:

- What is the time period principle?
- How do accrual and cash-basis accounting procedures differ?
- What are the different types of account adjustments?
- How do accountants prepare adjusted trial balances?
- What's the difference between permanent and temporary accounts?
- How do nominal accounts differ from real accounts?
- What steps are involved in the closing entry process?
- How do clients prepare post-closing trial balances?

### 1. The Differences Between Accrual & Cash-Basis Accounting

There are two accounting methods that companies can choose from when deciding how they want their books done. They are cash basis and accrual basis. In this lesson, you will learn the differences between the two.

### 2. Using Accrual Accounting to Make Financial Statements More Useful

What is the relationship between the financial statements and accrual accounting? Do you know? By the time this lesson is over, you will not only know what the relationship is between the two but also why that relationship is important.

### 3. Accrued Expenses & Revenues: Definition & Examples

Accruals are a part of the accounting world for most businesses. In this lesson, you will learn about two important parts of the concept of accruals: accrued revenue and accrued expenses.

### 4. Preparing Financial Statements

Financial statements are the most sought after reports in the financial industry. In this lesson, you will learn how to prepare them using information found on the adjusted trial balance.

### 5. Temporary & Permanent Accounts: Definition & Differences

Accounts are classified in a variety of ways in accounting. In this lesson, you will learn about two types of account classifications: temporary and permanent accounts.

### 6. Real Accounts vs. Nominal Accounts: Definition, Differences & Examples

In accounting, there is a classification for everything. Transactions, financial statements, and accounts are broken down into classifications. In this lesson, we will be discussing two classifications of accounts - real accounts and nominal accounts.

### 7. Debt Financing: Definition, Types, Advantages & Disadvantages

In this lesson, we'll explain debt financing. You'll learn about the process of obtaining a loan and selling bonds. We'll also discuss the advantages and disadvantages of each type of debt financing.

### 8. Deficit Financing: Definition & Concept

In this lesson, we will learn about deficit financing. We will define the term and learn some facts that surround this practice. The lesson will conclude with a summary and a quiz.

### 9. Differential Cost in Accounting: Definition, Analysis & Formula

Each day we make decisions, but how much thought goes into all of the differences for each choice? Differential costs in accounting analyze those variations in depth; this lesson shows you how.

### 10. Direct Labor: Definition & Cost Formula

Direct costs are explained through a real-life example that shows the importance of tracking and accounting for direct costs. The steps of calculating direct labor is included.

### 11. Dividend Payout Ratio: Definition, Formula & Analysis

Company shareholders invest their money in corporations by purchasing shares of a corporation's stock in exchange for a percentage of ownership, as well as dividend payouts. Learn what dividends are, how to calculate the dividend payout ratio, and analyze the results in this lesson.

### 12. How to Calculate Asset Turnover Ratio: Formula & Example

The asset turnover ratio is one of the items that companies and potential stockholders look at in order to figure out how well a company's money is working for it. In this lesson, we will learn how to calculate a company's asset turnover ratio.

### 13. How to Calculate Current Yield: Definition, Formula & Graph

In this lesson you will learn about calculating current yield for stocks and bonds and how it can help you see what your return on investment will be. You will learn what current yield is, the formula to calculate it, and how to graph it.

### 14. How to Calculate Depreciation Expense: Definition & Formula

As property wears out, it loses some of its value, which is called depreciation. In this lesson, we will learn three of the most common methods of calculating depreciation expense, including the straight-line method.

### 15. How to Calculate Free Cash Flow: Formula, Analysis & Example

Free cash flow is an important financial measurement for any business. It is a signal that the company can pay down debt, buy back stock, pay out dividends or allow for company expansion. In this lesson, you will learn the basics of free cash flow.

### 16. How to Calculate Future Value: Formula & Example

This lesson will give an overview of and explain the future value formula. Also in this lesson, various examples will be explored using the future value formula.

### 17. How to Calculate Gross Profit Margin: Definition & Formula

In this lesson, you'll learn the purpose of calculating gross profit margin and explore its components. You'll also learn how to analyze the results of the calculation.

### 18. How to Calculate Interest Expense: Formula & Example

This lesson will provide the formula for how to calculate interest expense. This lesson will also explain the phrase and provide a sample calculation.

### 19. How to Calculate Internal Rate of Return: Definition & Formula

In this lesson we will be discussing internal rate of return. We will start by defining the concept. We will then look at the formula used to calculate internal rate of return. Finally, we will complete the lesson by using the formula to calculate the internal rate of return for a project.

### 20. How to Calculate Net Present Value: Definition, Formula & Analysis

The value of money changes over time. If you spoke to your parents or grandparents about what things cost when they were children, you will see a big difference. This concept is called net present value.

### 21. How to Calculate Net Profit Margin: Definition & Formula

This lesson discusses the importance of the net profit margin. The formula is explained and an example is provided that walks through the steps of calculating net profit margin.

### 22. How to Calculate Net Working Capital: Definition & Formula

To operate effectively, businesses must be able to pay their bills as they become due. The best way to determine a business' ability to pay its bills is to calculate its net working capital. Learn what net working capital is and how to calculate it in this lesson.

### 23. How to Calculate Owner's Equity: Definition, Formula & Examples

In this lesson, you'll learn how to calculate owner's equity. We'll explore the definition and formula of owner's equity through the lens of a hypothetical business, and take a look at some examples of how it appears on balance sheets.

### 24. How to Calculate Payback Period: Method & Formula

When making a decision regarding an investment, people and companies can compute the payback period to find out how long it will take to recover their initial investment. This lesson demonstrates how you can use this formula.

### 25. How to Calculate Profit Margin: Definition & Formula

By utilizing profit margins, companies can understand how well they are maximizing sales, controlling expenses, and comparing to their competition. This lesson explains what profit margin is and how to calculate net profit margins.

### 26. How to Calculate Risk Premium: Definition & Formula

When people invest in the stock market, they generally expect to get paid more money for taking greater risks. This is known as the risk premium. In this lesson we'll define and learn how to calculate risk premium.

### 27. How to Calculate Sales Revenue: Definition & Formula

This lesson discusses the importance of sales revenue, explains how sales revenue is calculated, and analyzes how sales revenue can affect the money a business has available.

### 28. How to Calculate the Break-Even Point - Definition & Formula

The break-even point is an important measurement in understanding the health of a company. This lesson explains what the break-even point is, how the break-even point is calculated and the formula for determining the break-even point.

### 29. How to Calculate the Degree of Operating Leverage: Formula & Example

In this lesson we'll discuss degree of operating leverage, an important tool that is used by financial analysts to gauge the health of a company. We'll define the concept, discuss the formula, and solve a real-world example.

### 30. How to Calculate the Rate of Return: Definition, Formula & Example

In this lesson, we will define the rate of return and explore how it's used in today's business decisions. Using the formula and an example, we'll learn how to calculate the rate of return to determine if a particular business decision is a wise one.

### 31. How to Calculate the Return on Equity: Definition, Formula & Example

After watching this video lesson, you will learn how the return on equity helps you as a potential investor determine whether a certain company is worth investing in or not. You'll also learn how companies perform this calculation.

### 32. How to Calculate Yield to Maturity: Definition, Equation & Example

In this lesson, you will learn what yield to maturity is, discover the formula for calculating it, and see some examples of how the formula works and what it reveals about investments.

### 33. Unearned Revenue in Accounting: Definition & Examples

This lesson will explain the concept of unearned revenue and how it applies in different business settings. It will also explain how and when unearned revenue is recognized and the journal and adjusting entries needed for unearned revenue.

### Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

### Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

### Other Chapters

Other chapters within the Financial Accounting: Help and Review course

- Introduction to Accounting: Help and Review
- Financial Statements in Accounting: Help and Review
- Mechanics of the Accounting Cycle: Help and Review
- Project Evaluation & Analysis
- Internal Controls in Accounting: Help and Review
- Merchandising Operations and Inventory in Accounting: Help and Review
- Current and Long-Term Liabilities in Accounting: Help and Review
- Adjusting Accounts & Preparing Financial Statements: Help and Review
- Taxation of Business Entities
- Accounting Changes & Errors
- Classifying Costs in Accounting
- Cost Accounting Methods
- Cash Flow Statements & Disclosures
- Asset & Inventory Management
- Small Business Financing
- Small Business Accounting
- Financial Reporting