Financial statements are written records of an organization’s financial information. The four basic financial statements of a corporation are 1) balance sheet, 2) income statement, 3) cash flow statement, and 4) Owner’s Equity statement. These four functions are one of the most necessary components of business information, and are the principal method for communicating financial information about the overall existence to outside parties. From a technical stand point, financial statements are the result of the financial position of an organization at a given point in time. In most cases, financial statements are designed to meet the needs of many diverse users; in particularly it has satisfied the needs of present and potential owners and creditors. Financial statements result from simplifying, condensing, and aggregating masses of data obtained primarily from an organization or an individual’s accounting system.
Let’s begin with balance sheets. The purpose of the balance sheet is to show the assets of the organization. Balance sheets are set up on a fix point called a reporting period--- which can be reported as a day, a month, a quarter, a year. My current employer is set up to report monthly. When viewing the balance sheet it shows me what the company owns and how much it owes. Balance sheets include assets such as -property, cash, anything owned of value, liabilities and the shareholder's equity.
The income statements show the revenue earned during a day, a month, or quarter reporting period. Included in the report are the expenses and cost of creating the company revenue. When the expenses and costs are removed from the final total revenue, the bottom line of the report will reveal if the company lost money or made money. This report is often referred to as the profit and loss statement. In the recent chapters, we learned that this feature of the income statement is the EPS - earnings per share. The EPS reveals what a shareholder would...