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The accounting summary report for the Lemonade stand business is focused on the first six business days. The accounting summary report will discuss the journal, income statement and balance sheet, three key documents that a business has to have in order to perform its operations.
The journal for the Lemonade stand business is generated from the data from the first six days of operations. The journal shows the summary of all the transactions conducted by the business and shows the ending balances of all the accounts held by the business. The first transaction is the investment of capital by the owners on the first day, which increases owners’ equity by $50 and increases cash by the same margin.
The purchase of equipment by on credit increases the accounts payable by 413.75, and increases inventory by the same amount. The other transaction that appears dominant in the journal is the sale of lemonade, which increases cash and reduces the inventory held.
The reduction in inventory is transferred to an expense account by debiting the cost of goods sold account and crediting the inventories so that the inventories reduce and the relevant expenses are charged in the relevant accounting period. After all the transactions have been recorded in the journal, the transactions are transferred to a general ledger, T-accounts, which record the transactions in the independent records for each account.
The balance sheet for the Lemonade stand business is got from the data in the journal and the general ledger; and is a summary of the final figures for the account held by the Lemonade stand business. The balance sheet data shows that the final cash account has a balance of $185.90, which is a figure got after adding all the revenues that come from the business and subtracting the cash outflows; expenses and purchases.
The other item in the balance sheet is the inventory, which shows a final figure of $10.05, which is the final figure after all sales, purchases and replacement of inventory has been done. After cash and inventory have been added up, the fixed assets are added to the balance sheet, which, in this case study, are the assets that the stand has. The equipment for the lemonade stand is valued at $9.00, a figure that is found after adding up all purchases of equipment that the stand possesses.
Liabilities that the lemonade stand has are accounts payable, which are realized when the lemonade stand makes purchases on credit. The liabilities are than added to the owners’ equity, which is in itself a summation of the owner capital and retained earnings (Brownfield, 2007). The owners’ equity is a total of $165.95, which, when added to the liabilities worth $39.00, come up to a total of $204.95, which is equal to the total assets held by the firm.
The income statement for the Lemonade stand business is made up of two figures, the revenues from sales and expenses relating to the cost of inventory used by the firm (Brownfield, 2007).
The net income from the income statement is realized after subtracting the expenses from the revenues, and for the lemonade stand business, the revenues are $185.90 and expenses are $59.95. From this data, the net income or earnings are estimated as $125.95, which is a figure that indicates that the lemonade made a profit for the first season of operations.
Brownfield, L. (Ed.). (2007). MBA Essentials. New York: McGraw-Hill Learning Solutions.