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About Financial Statements
The Financial Statements are the formal records that outline financial activities of a business, person, or
any other entity.
Or The Financial Statements are the formal records that shows Credits and Debits.
Financial Statements represent the relevant financial information in a simple , concise and easy to
understand manner.
There are four basic financial Statements:
a)
b)
c)
d)
Balance Sheet
Statement of Retained Earnings
Income Statements
Statements of cash flows
Balance Sheet
The Balance Sheet is a Statement which lists the assets , liabilities and equity accounts of the company
at a specific point in time.
In Short Asset means that the thing a Company owns , which include cash , investments , property ,
buildings etc. . On the other hand liabilities mean that the thing a Company owe and the Equity means
that the thing a company is getting from Shareholders.
The Accounting Equation can be represented by an algebraic formula:
Assets = Liabilities + Equity
From the above equation , on the Balance Sheet the Asset’s Section total is equal to the sum of total of
Liabilities section and the total of Equity section.
Assets
Liabilities
Equity
Cash
Accounts payable
Common stock
Property
Salaries payable
Retained earnings
Vehicle
Taxes payable
Inventory
Unearned revenue
Land
Bonds payable
Building
Furniture
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A sample Balance Sheet is shown Below
XYZ Company
Balance Sheet
As on December 31, 2012
Assets:
Cash
Property
Inventory
Land
Total Assets
$ 50,000
36,000
95,000
70,000
$301,000
Liabilities:
Accounts payable
Salaries payable
Taxes payable
Total Liabilities
$66,000
55,000
25,000
$146,000
Stockholders’ Equity:
Common stock
Retained earnings
Total Stockholder’s Equity
$ 20,000
135,000
$155,000
Total Liabilities and Stockholder’s Equity
$301,000
Further , the Assets and Liabilities are classified as Current and non-current . On the basis of this
classification a balance sheet known as Classified Balance Sheet is prepared in which the assets are
further classified into Current and non-current form and similarly liabilities are also classified as Current
and non-current form.
Statement of Retained Earnings
A Statement of retained earnings is a basic financial statement which outlines the changes in
Company’s Retail Earning for a specified period.
A sample Statement of Retained Earnings is shown Below
XYZ Company
Statement of Retained Earnings
For the Year Ended December 31, 2012
Beginning balance, January 1, 2012
Add: Net income
Less: Dividends
Ending balance, December 31, 2012
$110,000
55,600
25,400
$140,200
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Income Statement
The Income Statement is a financial Statement that gives the financial performance results of a business
during an accounting period . Income Statement actually lists the Revenue and Expenses and gives the
difference between them. This difference is known as Net Income.
A sample Income Statement is shown Below
XYZ Company
Income Statement
For the month ended Dec 31, 2012
Revenues:
Sales
Total revenue
Expenses:
Wages Expense
Taxes
Rent
Telephone
Electricity Expense
Office supplies
Total expenses
Net income
$300,000
$300,000
$105,000
30,000
15,000
7,000
10,000
2,000
$169,000
$131,000
Statement of Cash Flows
A Statement of Cash Flows is a quarterly Financial Statement which provides information about the
cash inflows as well as outflows a company receives or pays respectively.
The Purpose of the Statement of Cash flows is get to know about how Company’s cash was generated
and where it was spent . The Statement of Cash Flows divided into three main sections-:
a) Cash Flows from Operating Activities
b) Cash Flows from Investing Activities
c) Cash Flows from Financing Activities
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A sample Cash Flow Statement (by Indirect Method) is shown Below
XYZ Company.
Cash Flow Statement
For the Year Ended Dec 31, 2012
Cash Flows from Operating Activities:
Operating Income
Depreciation Expense
Decrease in Accounts receivable
Net Cash Flow from Operating Activities
$500,000
100,000
-90,000
$510,000
Cash Flows from Investing Activities:
Sale of Land
Purchase of object
Net Cash Flow from Investing Activities
$200,000
-55,000
$145,000
Cash Flows from Financing Activities:
Payments of Bonds Payable
Net Cash Flow from Financing Activities
Net Change in Cash
Beginning Cash Balance
Ending Cash Balance
-$300,000
-$300,000
$355,000
200,213
$555,213