Note
Financial Statements
Financial Statements consists of
Balance Sheet
A snapshot of a company’s financial position at a specific point in time, detailing assets, liabilities, and shareholders’ equity.
Accounting Equation:
Assets = Liabilities + Owner’s equities
- Assets: Resources owned by the company (e.g., cash, inventory, property).
- Liabilities: Obligations owed to outsiders (e.g., loans, accounts payable).
- Owner’s Equity: Amount of an owner’s net investment in a business + profit from operations (e.g., common stock, retained earnings).
Forms of Balance Sheet:
- Reporting Form (P. 4)
- Accounting Form (P. 5)
Income Statement
Measure operating result of business during a given period of time
Revenue - Expense = Net Income/Loss
- Revenue: prices of goods sold and services rendered to customer.
- Expense: cost of goods and services used in process of earning revenue.
- Net income: excess of revenue over expense.
Capital Statement
Note
Statement of Retained Earnings For the Date Period
Shows changes in owner’s equity during a specific period of time
Beginning Capital
- additional investment
- net income for the period
- withdrawal = Ending Capital
Relation between statements
Note
Our task is to convert Adjusted Trial Balance into Balance Sheet, Income Statement, and Capital Statement.