Chapter 1 Lecture 3 - Chapter 1 Lecture 3 Learning...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 1 Lecture 3 Learning Objective 6,7 Learning Objective 6-Identify the four basics financial statements. Summary Statement Yes there are 4 statements. Accountants communicate their information through financial statements. The four principal statements are the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows . In Accounting 101 you learned 3 out of the 4. Every financial statement has a three-line heading. The first line gives the name of the company, the second line gives the name of the statement, and the third line gives the relevant dates (the date of the balance sheet or the period covered by the other three statements). The income statement, whose components are revenues and expenses, is perhaps the most important financial statement. Its purpose is to measure a business’s profitability during a given period. The net income or net loss is used to update retained earnings on the statement of retained earnings. Net income (loss) also appears on the statement of cash flows. The statement of retained earnings is a calculation of the changes in retained earnings over an accounting period. The first item on the statement is retained earnings at the beginning of the period; it is followed by an addition for net income and a deduction for dividends. The ending figure is transferred to the retained earnings section of the balance sheet. Many companies use a statement of stockholders’ equity in place of the statement of retained earnings. The balance sheet shows the financial position of a business as of a particular date. The resources used in the business are called assets, debts of the business are called liabilities, and the owner’s financial interest in the business is called stockholders’ equity. Changes that occur in these accounts are reflected in the statement of cash flows.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The statement of cash flows provides users with information about the business’s liquidity by disclosing all the important operating, investing, and financing activities that affect its cash balance during the accounting period. Cash flows
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/10/2011 for the course ACCOUNTING 201 taught by Professor Notsure during the Spring '11 term at Edmonds Community College.

Page1 / 5

Chapter 1 Lecture 3 - Chapter 1 Lecture 3 Learning...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online