Financial Statement

Definition:

• Includes
  • Balance Sheet
  • Income Statement
  • Statement of Stockholders’ Equity
  • Statement of Cash Flows

Relationship among statements:

• 

1. Net income from the Income Statement results in an increase in ending retained earnings on the Statement of Stockholders’ Equity.
2. Ending retained earnings from the Statement of Stockholders’ Equity is one of the two components of stockholders’ equity on the Balance Sheet
3. The change in cash on the Cash Flow Statement added to the beginning-of-the-year balance in cash equals the end-of-year balance in cash on the Balance Sheet

• Borrowing money from Cash Flow Statement will incur interest, note payable in Balance Sheet
• Because of the relation ship, Income Statement must be prepared first, then Statement of Stockholders’ Equity, then Balance Sheet or Statement of Cash Flows to compare the remaining cash.

Notes and financial statement formats

• Note (footnote): Provide supplemental information about the financial condition of a company, without which the financial statements cannot be fully understood
• Most financial statements include the monetary unit sign (in the United States, the $) beside the first dollar amount in a group of items (e.g., the cash amount in the assets).
  • Also, it is common to place a single underline below the last item in a group before a total or subtotal (e.g., property, plant, and equipment).
  • For group totals (e.g., total assets), a dollar sign is placed beside each amount and a double underline is set below.
  • The same conventions are followed in all four basic financial statements.
• IAS, Generally Accepted Accounting Principles and International Financial Reporting Standards, CPA