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Worked-example setupScope and assumptions
- Maple Studio is a standalone design-services corporation; amounts are whole US dollars for calendar 2026.
- Beginning Common Stock is $20,000 and Retained Earnings is $8,000. There are no share transactions, taxes, or other equity changes.
- For the opening equation, assume Equipment of $30,000 less Accumulated Depreciation of $2,000, with no other opening assets or liabilities. Only beginning equity is needed to prepare the statements.
- The adjusted trial balance supplies the ending asset and liability balances and the current year's revenue, expenses, and dividends.
- Period
- Year ended December 31 and position at December 31
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Try the statements first
Use the adjusted trial balance below to prepare an income statement, a statement of changes in equity, and a balance sheet. Include the company name, statement name, reporting period or date, account lines, subtotals, and totals.
Maple Studio's reporting year runs from January 1 through December 31, 2026. Common Stock was $20,000 and Retained Earnings was $8,000 at the beginning of the year. No shares were issued or retired during the year. Maple declared $2,000 of dividends and has no other equity changes. Ignore income taxes.
| Maple Studio | Amount | Amount |
|---|---|---|
| Adjusted Trial Balance | ||
| December 31, 2026 · US Dollars | Debit | Credit |
| Cash | $19,400 | |
| Accounts Receivable | 9,600 | |
| Equipment | 30,000 | |
| Accumulated Depreciation | $6,000 | |
| Accounts Payable | 7,500 | |
| Wages Payable | 1,500 | |
| Common Stock | 20,000 | |
| Retained Earnings | 8,000 | |
| Service Revenue | 46,000 | |
| Wages Expense | 18,000 | |
| Rent Expense | 6,000 | |
| Depreciation Expense | 4,000 | |
| Dividends | 2,000 | |
| Total | $89,000 | $89,000 |
Prepare the statements on paper before reading the worked answer. Trace net income into the statement of changes in equity, then carry ending equity into the balance sheet. The Retained Earnings balance on this trial balance excludes the current year's income and dividend transfers. Calculate the ending balance instead of copying the trial-balance amount.
Maple Studio's income statement
Expenses total $18,000 + $6,000 + $4,000 = $28,000. Subtract those expenses from $46,000 of revenue to calculate $18,000 of net income. Dividends do not enter this calculation because they are distributions to shareholders, not expenses.
| Maple Studio | Amount |
|---|---|
| Income Statement | |
| Year Ended December 31, 2026 · US Dollars | |
| Service revenue | $46,000 |
| Wages expense | (18,000) |
| Rent expense | (6,000) |
| Depreciation expense | (4,000) |
| Total expenses | (28,000) |
| Net income | $18,000 |
Maple Studio's statement of changes in equity
Common Stock remains $20,000 because there were no share transactions. Retained Earnings ends at $8,000 + $18,000 - $2,000 = $24,000. Adding the two ending balances gives $44,000 of total equity. This statement reconciles both equity components instead of explaining only retained earnings.
| Maple Studio | Amount | Amount | Amount |
|---|---|---|---|
| Statement of Changes in Equity | |||
| Year Ended December 31, 2026 · US Dollars | Common stock | Retained earnings | Total |
| Balance, January 1 | $20,000 | $8,000 | $28,000 |
| Net income for the year | 18,000 | 18,000 | |
| Dividends | (2,000) | (2,000) | |
| Balance, December 31 | $20,000 | $24,000 | $44,000 |
Maple Studio's balance sheet
Equipment's carrying amount is $30,000 - $6,000 = $24,000. Total assets are $19,400 + $9,600 + $24,000 = $53,000. Liabilities total $7,500 + $1,500 = $9,000; adding $44,000 of ending equity gives the same $53,000.
| Maple Studio | Amount |
|---|---|
| Balance Sheet | |
| December 31, 2026 · US Dollars | |
| Cash | $19,400 |
| Accounts receivable | 9,600 |
| Equipment, at cost | 30,000 |
| Less: accumulated depreciation | (6,000) |
| Equipment, carrying amount | 24,000 |
| Total assets | $53,000 |
| Accounts payable | $7,500 |
| Wages payable | 1,500 |
| Total liabilities | $9,000 |
| Common stock | 20,000 |
| Retained earnings | 24,000 |
| Total equity | 44,000 |
| Total liabilities and equity | $53,000 |
Check the three connections
The income statement reports $18,000 of net income. The equity statement uses that same result to reach $24,000 of ending retained earnings and $44,000 of total equity. Both ending balances appear on the balance sheet.
Maple's $53,000 of assets less $9,000 of liabilities equals $44,000 of equity. Net assets means assets less liabilities; it is not another name for total assets. Each comparison checks a different part of the statement preparation.
Keep the reporting question clear
The income and equity statements cover calendar 2026, while the balance sheet reports balances at December 31. All three describe Maple alone in US dollars. Owner assets are excluded because the corporation is a separate reporting entity.
These are unclassified statements: current and noncurrent groups are not shown. The order of asset lines does not change their amounts or turn equipment into cash. An unexplained amount called other assets would need an account description, not acceptance merely because the totals agree.
The statements assume normal continued operations. They do not establish whether that assumption is appropriate for another company facing financial difficulty. They also do not measure every valuable feature of a business in dollars. Those reporting boundaries matter when interpreting the totals, even though this example does not ask you to evaluate them.
Verified calculation · financial statement articulation
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- activity
- 6 fields
Inspect data
{
"discontinued_operations": {},
"expenses": {
"depreciation_expense": 4000,
"rent_expense": 6000,
"wages_expense": 18000
},
"other_comprehensive_income": {},
"owner_distributions": {
"dividends": 2000
},
"owner_investments": {},
"revenues": {
"service_revenue": 46000
}
}- ending
- 3 fields
Inspect data
{
"assets": {
"accounts_receivable": 9600,
"accumulated_depreciation": -6000,
"cash": 19400,
"equipment": 30000
},
"equity": {
"common_stock": 20000,
"retained_earnings": 24000
},
"liabilities": {
"accounts_payable": 7500,
"wages_payable": 1500
}
}- opening
- 3 fields
Inspect data
{
"assets": {
"accumulated_depreciation": -2000,
"equipment": 30000
},
"equity": {
"common_stock": 20000,
"retained_earnings": 8000
},
"liabilities": {}
}Recomputed result
| Measure | Value |
|---|---|
| ending equation difference | 0 |
| ending total assets | 53,000 |
| ending total equity | 44,000 |
| ending total liabilities | 9,000 |
| equity rollforward difference | 0 |
| expected ending equity | 44,000 |
| net income | 18,000 |
| opening equation difference | 0 |
| opening total assets | 28,000 |
| opening total equity | 28,000 |
| opening total liabilities | 0 |
| total expenses | 28,000 |
| total owner distributions | 2,000 |
| total owner investments | 0 |
| total revenues | 46,000 |