ACCOUNTING 1 CHAPTER1

Prepare Financial Statements

These same four basic financial statements are used by all companies as the
primary means of communicating to stakeholders:

1. Income Statement
2. Balance Sheet
3. Statement of Owner’s Equity
4. Statement of Cash Flows
• Income Statement
Reports the success or failure of the company’s operations for a period of
time.
Include:
• All revenue
• All expenses
Note:
• Revenue <expenses =net income
• Revenue > expenses =net loss

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ACCOUNTING 1 CHAPTER1

• Statement of Owner’s Equity

Shows amounts and causes of changes in owner’s capital during the period.

Include:
• Owner’s capital beginning,

• Add: Investments Net income,

• Less: Drawings Owner’s capital End

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ACCOUNTING 1 CHAPTER1

• Balance Sheet

Reports assets and claims to those assets at a specific point in time.

Include:

• Assets

• Liabilities

• Owner Equity

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ACCOUNTING 1 CHAPTER1

• Statement of Cash Flows

Answers the question of whether the business generates enough cash to pay
its bills.
Include:
• Cash inflow
• Cash outflow
Comes from 3 activities
• Operating Activities
• Investing Activities
• Financing Activities

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