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Financial Statements

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Moneyzine Editor
1 mins
November 6th, 2024
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Financial Statements

Definition

The accounting term financial statement refers to a series of documents that reflect the collection and summary of accounting data. Financial statements include the balance sheet, income statement, cash flow statement, and the statement of retained earnings.

Explanation

The creation of a company's financial statements takes place as part of the accounting cycle. The steps leading up to the production of these documents includes:

  1. Entering of transactions in the appropriate journals

  2. Postings made from journals to the general ledger or ledgers

  3. Preparation of adjusting entries to the general ledger or ledgers

  4. Preparation of a trial balance

There are four financial statements produced by accountants:

  • Balance Sheet: a summary of the company's financial position with respect to assets, liabilities, and owner's equity.

  • Income Statement: a summary of the company's operating condition, including revenues and expenses.

  • Cash Flow Statement: a summary of the financial resources (funds) consumed by the company as well as those provided by operations, including changes in working capital and cash.

  • Statement of Retained Earnings: a reconciliation of the balance held in retained earnings at the beginning and end of each accounting period.

Related Terms

  • Income Statement
    The income statement is a financial accounting report that demonstrates how net income, or profit, is derived from revenues. The main categories appearing on an income statement include revenues, cost of goods sold, operating expenses, non-recurring items and net income.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024
  • Balance Sheet
    Also known as a statement of financial position, the balance sheet is used to show the financial health of a company at a particular point in time. The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024
  • Cash Flow Statement
    The cash flow statement is a financial accounting report that demonstrates how cash flows both into and out of a company. Cash flow statements provide investors and analysts with insights into the change in cash and cash equivalents in a given accounting period.
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    Moneyzine Editor
    November 6th, 2024
  • Assets
    The accounting term used to describe an economic resource, which is owned by the corporation and expected to provide future benefits to its operation, is asset. Appearing on the balance sheet, assets are typically broken down into two categories:
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    Moneyzine Editor
    November 6th, 2024
  • Liabilities
    The financial accounting term liability is used to describe the debt of a corporation that results from a transaction involving the transfer of an asset or the provision of a service. Liabilities are reported on a company's balance sheet.
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    Moneyzine Editor
    November 6th, 2024
  • Cash Flow Return on Revenues
    The term cash flow return on revenues refers to a metric that allows the investor-analyst to understand the ability of a company to generate cash at various revenue volumes. Cash flow return on revenues is not linear meaning it does not scale evenly.
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    Moneyzine Editor
    November 6th, 2024
  • Expenses
    The term expense is used to describe the outflow of money to pay for a product or service. In financial accounting, expenses are defined as the cost of goods sold, or services used up, in the process of producing revenues for a company. The expenses of a company are reported on the income statement.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024
  • Accounting Events and Transactions
    The accounting industry generates billions of dollars. Accounting industry statistics indicate the size of the accounting industry was $544.06 billion in 2020. It gives us an idea of how many accounting events and transactions occur every day in the world. In this article, we will explain what are accounting events and transactions. The term accounting event refers to a change in an item that should be reflected in the company's financial statements. Accounting events can be internal or external and usually involve a change in assets, liabilities, revenues, expenses or owner's equity.
    Moneyzine Editor
    Moneyzine Editor
    December 12th, 2023
  • The financial accounting term statement of retained earnings refers to a financial report used by companies to reconcile the starting and ending balance of retained earnings. Typical line items in this statement would include operating loss or profit, dividends, and any redemption of common stock.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024
  • The financial accounting term property, plant and equipment disclosures refer to the minimum information companies must divulge on their financial statements. Disclosure requirements fall into four categories: cost, accumulated depreciation, service lives, depreciation methods, capitalization thresholds, and restrictions.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024

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