# Week 4 the Lemonade Stand

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September 20, 2011

The Income Statement is the financial report that depicts the operating performance of a company (revenues less expenses generated = profit) over a specific period of time and facilitates the analysis of a company’s growth, cost, and profitability. This analysis focuses on the financial analysis of The Lemonade Stand during Season 1 and Season 2.
The Balance Sheet is another type of financial statement used by a company to see a snapshot of the company's financial position at a particular point in time. It lists the value of the company's assets followed by its liabilities. A balance sheet can be summed up by a simple equation:
Assets = Liabilities + Owners' Equity
To better understand how a balance sheet works, we can review the steps the balance sheet for The Lemonade Stand has gone through so far. When my partner and I first started The Lemonade Stand, we had \$40 in cash, therefore, the balance sheet equation looked like this:
\$40 cash = \$0 Liabilities + \$40 Owner's Equity
Whenever a financial transaction occurs, both sides of the equation still have to balance; hence the name balance sheet.
After we purchased supplies for The Lemonade Stand, the assets changed, but the liabilities side of the balance sheet remains the same.
\$22.50 in supplies + \$17.50 cash (\$40 total assets) = \$0 Liabilities + \$40 Owner's Equity
The balance sheet’s fundamental purpose of the balance sheet is to describe a company's assets and then the claims on those assets, also known as liabilities.
On the first day selling lemonade, we sold 58 cups of lemonade at 60 cents a piece for a grand total of \$34.80 in revenue. To determine what we earned in profit, we put together an income statement. Sometimes income statements are referred to as profit and loss statements or P&Ls. An income statement takes the difference between a company's revenues and its expenses to determine net income or profit over

References: Brownfield, D. L. (2007). MBA Essentials [VitalSource Bookshelf version]. Retrieved from http://online.vitalsource.com/#/books/0390145432/pages/12105748

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