Learning objectives
After completing this unit, you will be able to:
- Build a multi-step income statement from an adjusted trial balance
- Prepare a classified balance sheet with current/non-current sections
- Construct a statement of cash flows (indirect method) that ties to cash on the balance sheet
- Roll forward equity on the statement of changes in stockholders' equity
- Read notes, disclosures, and accounting policies in a 10-K
Why this matters
Recording and adjusting entries are means; financial reporting is the deliverable outsiders actually use. Unit 5 is the assembly line: adjusted trial balance in, linked statements and footnotes out.
Unit overview
| # | Lesson | Core idea |
|---|---|---|
| 1 | Building the Income Statement | Multi-step P&L, margins, taxes, EPS preview |
| 2 | Building the Balance Sheet | Classification, net AR/PP&E, A = L + E checks |
| 3 | Building the Statement of Cash Flows | Operating, investing, financing; indirect reconciliation |
| 4 | Equity and the Statement of Changes in Equity | APIC, RE, dividends, OCI preview |
| 5 | Notes, Disclosures, and Accounting Policies | Policies, contingencies, leases, MD&A context |
Connection to applied work
Using one adjusted trial balance (from Unit 3 practice or a case), build all three primary statements plus an equity rollforward. Include a short footnote on revenue recognition policy. This is core Financial Accounting applied project work.
Practice
- From adjusted balances, compute gross profit, operating income, and net income.
- Verify ending cash on the cash flow statement equals cash on the balance sheet.
- List three items that appear in footnotes but not on the face of the income statement.
Knowledge check
- What is the order of statement preparation from adjusted trial balance?
- Why is depreciation added back in indirect operating cash flow?
- Where do dividends appear (and where do they not)?
- What is the purpose of Note 1 in a 10-K?
Key takeaways
- Statements must articulate; integrity checks are not optional.
- The cash flow statement explains accrual profit versus liquidity.
- Footnotes carry economically material information off the face.
- Unit 6 analyzes these published reports with ratios and red flags.
Unit assessment
Complete each section below. Score 80%+ on the quiz to finish this unit's assessment.
Exercises
Apply what you learned in this unit with structured practice.
Deliverable
300–500 word analysis document saved to your portfolio under ACC 101.
Rubric
- • Framework applied correctly (not just named)
- • Specific evidence from a real example
- • Clear recommendation with tradeoffs acknowledged
- • Professional writing with source citation
Deliverable
Problem solutions + 150-word reflection in your ACC 101 workbook.
Rubric
- • Attempted all practice items before checking answers
- • Honest reflection on errors
- • Identifies a specific review action
Model / spreadsheet
Build or extend a spreadsheet model tied to this unit.
Deliverable
Spreadsheet file with Inputs / Model / Outputs tabs · One-paragraph summary of key insight from the model · Screenshot or export saved to portfolio
Rubric
- • Assumptions stated explicitly
- • Logic is auditable (formulas or steps visible)
- • Output answers a specific business question
- • Sensitivity or scenario considered
Knowledge quiz
Check your understanding before marking the unit complete.
1. A multi-step income statement shows gross profit as:
2. Financial statements for external reporting are built directly from the:
3. Using the indirect method, if accounts receivable increased by $40,000 during the year, the adjustment to net income is:
4. Repaying the principal on a bank loan is classified on the statement of cash flows as:
5. Depreciation expense in the indirect method operating section is:
6. On a classified balance sheet, accounts payable is typically:
7. The statement of changes in equity explains movements in equity from:
8. Footnotes to financial statements primarily provide: