4 basic financial statements

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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.


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