Master the structure of the three core statements. Study annotated reference examples, then practise filling in real skeletons — account names, amounts, and everything in its correct place.
Every business communicates its financial health through three core statements. Knowing how to build each one — and what goes where — is the foundation of all accounting work.
Trial Balance
Lists every account with its debit or credit balance. Debits must equal credits.
Income Statement
Shows revenues minus expenses over a period. The bottom line is Net Income.
Balance Sheet
A snapshot of assets, liabilities, and equity at one point in time. Both sides must balance.
Pre-closing TB: all accounts open including revenue and expense accounts.
| Maple Ridge Consulting Trial Balance (Pre-Closing) — December 31, 2024 | ||
| Account Name | Debit | Credit |
|---|---|---|
| Cash | $14,200 | |
| Accounts Receivable | $8,500 | |
| Prepaid Insurance | $1,200 | |
| Equipment | $25,000 | |
| Accumulated Depreciation | $5,000 | |
| Accounts Payable | $3,400 | |
| Notes Payable | $10,000 | |
| Common Stock | $20,000 | |
| Retained Earnings | $4,500 | |
| Service Revenue | $18,000 | |
| Salaries Expense | $9,000 | |
| Rent Expense | $2,000 | |
| Utilities Expense | $500 | |
| Depreciation Expense | $500 | |
| TOTALS | $60,900 | $60,900 |
Pre-closing: revenue & expense accounts are still open. After closing entries, those accounts zero out and Retained Earnings increases by $6,000 net income — matching the Balance Sheet.
Covers a period of time ("for the year ended").
| Maple Ridge Consulting Income Statement — For the Year Ended December 31, 2024 | |
| Revenue | |
| Service Revenue | $18,000 |
| Total Revenue | $18,000 |
| Expenses | |
| Salaries Expense | $9,000 |
| Rent Expense | $2,000 |
| Utilities Expense | $500 |
| Depreciation Expense | $500 |
| Total Expenses | $12,000 |
| Net Income | $6,000 |
Net Income = Total Revenue − Total Expenses. Net income flows to Retained Earnings on the Balance Sheet.
Point-in-time snapshot ("as of"). Total Assets = Total Liabilities + Equity.
| Maple Ridge Consulting Balance Sheet — As of December 31, 2024 | |
| Assets | |
| Current Assets | |
| Cash | $14,200 |
| Accounts Receivable | $8,500 |
| Prepaid Insurance | $1,200 |
| Total Current Assets | $23,900 |
| Non-Current Assets | |
| Equipment | $25,000 |
| Less: Accumulated Depreciation | ($5,000) |
| Total Non-Current Assets | $20,000 |
| Total Assets | $43,900 |
| Liabilities & Stockholders' Equity | |
| Current Liabilities | |
| Accounts Payable | $3,400 |
| Long-Term Liabilities | |
| Notes Payable | $10,000 |
| Total Liabilities | $13,400 |
| Stockholders' Equity | |
| Common Stock | $20,000 |
| Retained Earnings ($4,500 + $6,000 net income) | $10,500 |
| Total Stockholders' Equity | $30,500 |
| Total Liabilities & Equity | $43,900 |
Total Assets must always equal Total Liabilities + Equity. The Balance Sheet is a snapshot at one point in time ("as of" date).