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shows the checks and balances of a

company
a formal record of the financial
activities of a business, person, or
other entity
all the relevant financial information,
presented in a structured manner and
in a form easy to understand
profit and loss statement" or "statement of
revenue and expense
shows revenues, expenses, gains, and losses
indicates how the revenue is transformed into
the net income
displays the revenues recognized for a specific
period, and the cost and expenses charged
against these revenues, and taxes
purpose is to
show managers and investors whether the
company made or lost money during the period
being reported
A. Revenues and Gains
1. Revenues from primary activities
2. Revenues or income from secondary
activities
3. Gains (e.g., gain on the sale of long-term
assets, gain on lawsuits)
B. Expenses and Losses
1. Expenses involved in primary activities
2. Expenses from secondary activities
3. Losses (e.g., loss on the sale of long-
term assets, loss on lawsuits)
"statement of financial position
reveals the
company's assets, liabilities and
owners' equity (net worth)
are the resources of the company that
have been acquired through transactions,
and have future economic value that can be
measured and expressed in dollars
2 types: Current and Non-current
C (Cash and Cash Equivalents)
I (Short-term Investments)
R (Receivables)
I (Inventories)
P (Prepaid Accounts)
are obligations of the company; they
are amounts owed to creditors for a
past transaction and they usually have
the word "payable" in their account title
2 types: Current and Non-current
source of the company's assets.
sometimes referred to as the book
value of the company, because
owner's equity is equal to the
reported asset amounts minus the
reported liability amounts.
Assets = Liabilities + Shareholders' Equity
provides information about cash
receipts and payments concerning
the operating, investing and
financing activities of the business
shows the sources of cash and how
cash was used to arrive at the ending
cash balance
provide information on a
firm's liquidity and solvency and its ability to
change cash flows in future circumstances
provide additional information for evaluating
changes in assets, liabilities and equity
improve the comparability of different firms'
operating performance by eliminating the
effects of different accounting methods
indicate the amount, timing and probability
of future cash flows
Cash involving operating activities
Cash involving investing activities
Cash involving financing activities
Supplemental information
Cash Inflow
Received Cash Account
Received Cash from Sales
Received Cash from Investor
Total Cash Inflow P
Cash Outflow
Paid Taxes
Purchased New Equipment
Paid Suppliers
Total Cash Outflow P
Net Cash Inflow(Outflow)
Add: Cash Balance, Beginning
Cash Balance, End P
Statement of Retained Earnings or
Equity Statement
Financial statement showing the
beginning balance, additions to and
deductions from, and the ending
balance of the shareholders' equity
account, for a specified period
uses information from the Income
Statement and provides information
to the Balance Sheet
Common Stock (recorded at par value)
+ Premium on Common Stock (issue price minus
par value)
+ Preferred Stock (recorded at par value)
+ Premium on Preferred Stock (issue price
minus par value)
+ Retained Earnings
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= Stockholders' Equity

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