| Course | AC112 Accounting Fundamentals for Management |
|---|---|
| Unit | Unit 5 |
| Paper type | Financial statement preparation |
| Length | About 850 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC112 Unit 5
Three Statements and What March Meant: A Unit 5 Financial Statement Preparation for a Dog Grooming Salon
[Student Name]
Purdue University Global
AC112: Accounting Fundamentals for Management
Unit 5 Financial Statement Preparation
[Instructor Name]
[Date]
The salon's statements use composite figures; the textbook, the FASB framework and the classic study of income numbers cited are real.
Adjusted Trial Balance Used
After the six Unit 4 adjustments, the balances at March 31 are: Cash $22,500; Accounts Receivable $1,460; Supplies $650; Prepaid Insurance $2,200; Equipment $18,000; Accumulated Depreciation $300; Accounts Payable $600; Wages Payable $540; Interest Payable $60; Notes Payable $12,000; Capital $30,000; Withdrawals $1,500; Grooming Revenue $10,860; Wages Expense $4,440; Rent Expense $2,200; Supplies Expense $850; Depreciation Expense $300; Insurance Expense $200; Interest Expense $60. Debits and credits each total $54,360.
Statement 1: Income Statement
Sudsy Hound Grooming. Income Statement. March, the salon's first month of operation.
Grooming revenue: $10,860. Expenses, largest first: wages $4,440; rent $2,200; supplies $850; depreciation $300; insurance $200; interest $60. Total expenses: $8,050. Net income: $10,860 minus $8,050 equals $2,810 (handoff A).
Reading. About 26 cents of every revenue dollar survived as profit in March. Wages took 41 cents and rent 20 cents, so labor and space together absorbed six of every ten dollars the salon brought in. Rent is fixed while wages move with appointments, which means each added booking keeps more of its revenue than the average suggests.
Statement 2: Statement of Owner's Equity
Sudsy Hound Grooming. Statement of Owner's Equity. Covering March.
Renata Cole, capital, March 1: $0. Add: owner investment $30,000; net income $2,810 (from handoff A). Less: withdrawals $1,500. Renata Cole, capital, March 31: $31,310 (handoff B).
Reading. Renata took out a little over half of what the salon earned. Her claim grew by $1,310 from operations net of withdrawals. If she withdraws more than the salon earns in a slow month, her equity will begin to shrink even while the business stays open.
Statement 3: Balance Sheet
Sudsy Hound Grooming. Balance Sheet. March 31.
Current assets: cash $22,500; accounts receivable $1,460; supplies $650; prepaid insurance $2,200. Total current assets: $26,810. Equipment $18,000, less accumulated depreciation $300: $17,700. Total assets: $44,510.
Current liabilities: accounts payable $600; wages payable $540; interest payable $60; current portion of notes payable $3,760. Total current liabilities: $4,960. Long-term liabilities: notes payable, less current portion, $8,240. Total liabilities: $13,200. Owner's equity: Renata Cole, capital, $31,310 (from handoff B). Total liabilities and owner's equity: $44,510.
Reading. The salon can pay what it owes in the next year more than five times over from current assets, almost all of it cash. Creditors have financed about 30 percent of the assets and Renata the rest. The $3,760 of the note due within a year is the largest near-term claim, and it will draw roughly $365 a month from cash.
How the Statements Connect
Net income is the only figure the income statement passes on, and the closing capital is the only figure the equity statement passes on, so an error in either one shows up as a balance sheet that will not balance.
The classified layout separates what is due within a year from what is not, because that is the first question a lender asks (Franklin et al., 2019). Splitting the note into its current and long-term portions makes the liquidity reading honest.
Why the Owner Should Care About the Profit Figure
Profit is not cash, but it is the figure that summarizes whether the salon's work covered its costs. Research going back decades shows that reported earnings carry information that users act on, even when they arrive alongside other news (Ball & Brown, 1968). The conceptual framework names owners and lenders as the people general purpose statements are written for (Financial Accounting Standards Board, 2018). For Renata, March's $2,810 says the salon covered its costs in its first month, with the warning that one month, and an opening month at that, is a small base for planning.
What to Watch in April
Three figures from these statements deserve attention next month. First, receivables of $1,460 are all owed by one kennel, so a single slow payer could hold up most of what the salon is owed. Second, cash of $22,500 is high only because the opening investment has not been spent; it is not evidence that the salon generates that much. Third, the first note payment of about $365 falls due on April 30, and it will be the first month in which the salon pays its own debt from its own receipts. A useful habit for Renata would be to compare each month's net income with the change in her bank balance, since the two will rarely match and the gap usually explains itself in receivables, purchases or loan payments.
Checks Performed
1. Revenue less expenses equals $2,810, carried to the equity statement.
2. Beginning capital plus investment and income, less withdrawals, equals $31,310, carried to the balance sheet.
3. Assets of $44,510 equal liabilities of $13,200 plus equity of $31,310.
4. Current and long-term portions of the note add to $12,000.
References
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159-178. https://doi.org/10.2307/2490232
Financial Accounting Standards Board. (2018). Conceptual framework for financial reporting: Chapter 1, The objective of general purpose financial reporting, and Chapter 3, Qualitative characteristics of useful financial information (Statement of Financial Accounting Concepts No. 8, as amended). https://www.fasb.org
Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting
What the AC112 Unit 5 assignment asks for
Unit 5 in AC112 supplies an adjusted trial balance and asks for the core financial statements. Work in the order the figures travel: profit is measured before the owner's capital can be updated, and capital is needed before the balance sheet can close. Use proper headings with the business name, statement name and period or date. List expenses in a sensible order, often largest first. A classified balance sheet separates current from long-term items and is usually expected when the business has long-term debt or equipment. Mark the handoffs so a grader can follow them. Most sections want a brief reading under each statement explaining what it means for the owner. Check that the balance sheet balances before submitting. Two to three pages is typical, with APA 7 citations for any concepts explained.
How this AC112 Unit 5 example is built
The sample lists the adjusted balances and confirms that debits and credits total $54,360. The income statement shows revenue of $10,860 and six expenses totaling $8,050, with net income marked as handoff A. Its reading notes that wages and rent absorb six of every ten revenue dollars. The equity statement adds the $30,000 investment and net income, subtracts $1,500 of withdrawals and marks $31,310 as handoff B. The balance sheet classifies $26,810 of current assets and splits the note into $3,760 current and $8,240 long-term. The highlighted sentence explains how errors surface through the handoffs. A section on what to watch in April and a list of four checks close the set.
Where the points sit in the AC112 Unit 5 rubric
Statement preparation is marked on correct amounts, correct placement and correct connections between statements. Net income must flow into equity, and closing equity into the balance sheet; graders check those links first. Proper headings and classification earn points of their own. Placing withdrawals on the equity statement rather than the income statement is a common scoring item. A balanced balance sheet is necessary but not sufficient. In AC112 the readings for the owner often carry substantial weight, because the course is about using statements to decide. Readings that cite a specific figure score higher than general comments. Layout, consistent labels and APA 7 citations complete the grade.
AC112 Unit 5 help: mistakes that cost points
Statement errors often begin with withdrawals listed as an expense, which understates profit and breaks the equity statement. Others carry the wrong capital figure into the balance sheet. Accumulated depreciation is sometimes added to equipment instead of subtracted. Current and long-term debt are left in one line, so liquidity cannot be read. Headings use a single date for the income statement. Readings repeat the numbers instead of interpreting them. If you have the adjusted trial balance and need three connected statements with readings, our team can prepare the set for your problem.
Get an AC112 Unit 5 example written to your instructions
Adjusted balances from your own Unit 5 problem, the section's instructions and the rubric are enough to build all three statements with readings attached. The first custom sample is free. Delivery runs 24-48h, and every figure in it traces to a line in the trial balance you were given. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
More AC112 papers and BS in Accounting samples
- AC112 Unit 1: Why Managers Read Entries Post
- AC112 Unit 2: Transaction Analysis Exercise
- AC112 Unit 3: Trial Balance Problem and Note
- AC112 Unit 4: Adjusting Entries Set
- AC112 Unit 6: Cash Flow Discussion
- AC112 Unit 7: Ratio Interpretation Memo
- AC112 Unit 8: Seminar Reflection
- AC112 Unit 9: Budget Schedule
- AC112 Unit 10: Management Report
AC112 Unit 5 questions, answered
Do I prepare a statement of owner's equity or of retained earnings?
That depends on whether your problem describes a sole proprietorship or a corporation. An owner with a capital account and withdrawals points to the owner's equity version; stockholders and dividends point to retained earnings. AC112 problems use both across sections, and the arithmetic has the same shape either way: opening balance, plus income, less distributions.
How long should the reading under each statement be?
Three or four sentences is typical, and longer is rarely better. Each reading names one fact an owner would act on and connects it to a figure on the statement directly above. Graders in AC112 reward specificity: a margin stated, a withdrawal compared with profit, near-term debts set against near-term cash.
Should the balance sheet be classified?
If the adjusted trial balance includes long-term assets or long-term debt, a classified layout helps the final reading, since it separates what is due soon from what is due later. Many AC112 problems are small enough that a simple list works. The rubric's named format wins, and classification is the safer default whenever a note payable extends past a year.
Where can I find a free AC112 Unit 5 sample paper?
This page has a complete AC112 Unit 5 financial statement preparation for a grooming salon, with an income statement, equity statement and classified balance sheet, marked handoffs and readings for the owner.
Why is the note split in the AC112 Unit 5 sample?
About $3,760 of the $12,000 equipment note is due within the next year, so it is a current liability; the remaining $8,240 is long-term. The split lets a reader judge short-term liquidity honestly.