Intro to Financial Statements

The Income Statement...

• shows whether the difference between revenue (sales) and expenses (costs) is a profit or a loss over a given period.

• shows a "snapshot" at a particular point in time of what the company has today (assets), how much it owes (liabilities), and what it is currently worth (shareholder equity).

• tracks the movement of cash into (cash inflows) and out of (cash outflows) the company over a specific period of time.

• is like a cash register for the company

The Balance Sheet...

• tracks the movement of cash into (cash inflows) and out of (cash outflows) the company over a specific period of time.

• shows a "snapshot" at a particular point in time of what the company has today (assets), how much it owes (liabilities), and what it is currently worth (shareholder equity).

• shows whether the difference between revenue (sales) and expenses (costs) is a profit or a loss over a given period.

On in the Income Statement, if revenues are greater than expenses, then...

• the balance will be positive, showing that the business is profitable.

• the balance will be negative, showing that the business is profitable.

• the balance will be positive, showing that the business is not profitable.

• the balance will be negative, showing that the business is not profitable.

The basic accounting equation is...

• Assets = Liabilities + Shareholder Equity

• Assets = Liabilities - Shareholder Equity

• Shareholder Equity = Assets + Liabilities

• Liabilities = Assets + Shareholder Equity

Assets includes...

• Items (tangible and intangible) a company owns that have monetary value.

• Tangible items that a company owns that have monetary value, but not intangible items such as accounts receivable that have not been collected on yet.

• money that has been invested in the business plus the cumulative net profits and losses the company has generated.

In an income statement, subtracting the cost of goods sold from the net sales provides the

• revenue

• net operating income

• gross profit

• net income

______is a financial statement that reports a business's assets, liabilities, and capital on a specific date.

• Balance Sheet
• Income Statement
• Statement of Cash Flows
• None of the Above

_______are anything of value owned, such as cash and buildings.

• Liabilities
• Assets
• Income Statement
• None of the Above

____are claims against assets, (debts)

• capital
• assets
• liabilities
• none of the above

You are presented a financial statement and from it you can tell what the business owed looking at a financial statement. By studying the information on the statement, you can tell what the business owns and what it owes as of a certain date. You are looking at:

• Income Statement
• Assets
• Revenues
• Balance Sheet