4 basic financial statements
how do we know someone got a loan
we look for an interest section
what is contributed capital
-Resources that investors contribute in exchange for an ownership interest -Equity resulting from contributions from owners
Four basic Financial Statements
1. Income Statement (aka Statement of Earnings, P&L) 2.Statement of Retained Earnings 3.Balance Sheet (aka Statement of Financial Position) 4.Statement of Cash Flows
how to owners contribute capital to a business
1. directly through capital stock 2. indirectly by retaining net income instead of paying dividends. THIS IS RETAINED EARNINGS
structure of balance sheet
Assets = Liabilities + Owner's Equity
structure of retained earnings statement
Beginning RE +/- NetIncome/Loss - Dividends = Ending RE
links from retained earning statement to others
Ending RE goes to the Balance Sheet.
links from income statement to other statements
Net Income/Loss goes to the Statement of Retained Earnings to compute ENDING RE.
structure of statement of cash flows
Operating Cash Flows +/- Investing Cash Flows +/- Financing Cash Flows = Net change in Cash
structure of an income statement
Revenue - Expenses = Net Income/Loss
purpose of balance sheet
Shows a company's Assets, Liabilities, and Owner's Equity at a specific point in time. usually end of a period
purpose of income statement
Shows a company's Revenues and Expenses over a specific period of time.
links from balance sheet to others
The balance sheet RE comes from the Statement of RE. The Cash balance should agree with the ending cash balance on the Statement of Cash Flows.
what is Equity and what two things make it up?
The difference between a company's Assets and Liabilities and represents the share of assets that are claimed by the company's owners. 1.contributed capital 2.retained earnings
statement of cash flows links to others
The ending Cash balance on the Statement of Cash Flows should agree with the balance in Cash on the Balance Sheet.
so what exactly are retained earnings?
The portion of a firms NET INCOME that is RETAINED by the business for future GROWTH. NOT DISTRibuted to owners in the form of DIVIDENDS -Equity resulting from profitable operations
what do you being an accounting period with? where do you report that net income/loss from the balance sheet
balance sheet income statement
current financial situation (position) is found where
balance sheet (what does a company owe)
examples of investing activies
buying and selling of assets
what is a dividend
distribution of profits to owners
examples of financing activities
generating of funds from and repayment of funds to creditors and investors.
three sections of statement of cash flows
operating investing financing activities
Dividend is reported on what kind of financial statement
statement of retained earnings
Owners of a business are usually interested in how their equity is growing as a result of profitable operations. They are also interested in how that equity is distributed in the form of dividends. Such information is reported on the
statement of retained earnings
examples of operating activities
1. purchase of supplies, 2.the payment of employees, 3. the sale of products
what three things does a balance sheet show
1.assets 2.liabilities 3.stock holders equity
purpose of statement of cash flows
Shows a company's inflows and outflows of cash over a specific period of time.
purpose of retained earnings statement
Shows the changes in a company's RE over a specific period of time.
