Financial Statements
The four financial statements are the Income Statement, Statement of Owner Equity or Statement of Retain Earnings, Balance Sheet, and the Cash Flow Statement.
Income Statement:
An income statement is an accounting statement that shows business results in terms of revenue and expenses. If revenues are greater than expenses, the report shows net income. If expenses are greater than revenues, the report shows net loss. An income statement can cover one, three, six, or twelve months. It cannot cover more than one year. The statement shows the result of all revenues and expenses throughout the entire period and not just as a specific date.
Statement of Owner’s Equity:
The statement of owner’s equity shows for a certain period of time what changes occurred in the business’ capital account. The capital account will be increase by any additional investments in the business and by the net income. The capital account will decrease due to any owner(s) withdrawals and a net loss from the income statement.
Balance Sheet:
A balance sheet will show the balance for all assets accounts, liabilities accounts, and the capital account for a particular date.
Statement of Cash Flows:
The statement of cash flows reports the entity’s cash flows (cash receipts and cash payments) during the period – where cash came from and how it was spent. It explains the causes of the changes in the cash balance. This information cannot be learned solely from other financial statements.