How do you prepare financial statements? (chapter 1)

Three sections of statements of cash flow

1) Cash flows from operating activities. Involves cash receipts for services and cash payments for expenses. 2) Cash flows from investing activities. Includes the purchase and sale of land and equipment for cash 3) Cash flows from financing activities. Includes cash contributions by stockholders and cash dividends paid to the stockholders.

Financial statements are prepared in the following order

1) Income statement 2) Statement of retained earnings 3) Balance sheet 4) Statement of cash flows

Balance sheet

1) Reports on an entity's assets, liabilities and stockholders' equity as of a specific date. 2) Assets = Liabilities + Stockholders' Equity

Statement of retained earnings

1) Reports on the changes in retained earnings for a specific period. 2) Beginning Retained Earnings + Net Income (or - Net Loss) - Dividends = Ending Retained Earnings

Income statement

1) Reports the net income or net loss of a business for a specific period. 2) (Revenues - Expenses = Net Income or Net Loss)

Statement of cash flows

Reports on a business's cash receipts and cash payments for a specific period.