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           Financial accounting information is conveyed through a standardized set of reports. You have already been introduced to the balance sheet. The othe fundamental financial statements are the income statement, statement of retained earnings, and statement of cash flows. There are many rules that govern the form and content of each financial statement. At the same time, those rules are not so rigid as to preclude variations in the exact structure or layout. Balance sheet can be presented as a horizontal or vertical layout, and each approach is equally acceptable. The basic form and content of each core financial statement is as follows:

       INCOME STATEMENT: A summary of an entity's results of operation for a specified period of time is revealed in the income statement, as it provides information about revenues generated and expenses incurred. The difference between the revenues and expenses is identified as the net income or net loss. The income statement can be prepared using a single-step or a multiple-step approach, and might be further modified to include a number of special disclosures relating to unique items. The income statement relates to activies of a specified time period (e.g. year, quarter, month), as is clearly noted in its title:

    Income Statement
    For the Year Ending December 31, 2009

       Service to Customers

       Interest Revenue

          Total Revenues




       Other Operating Expenses

          Total Expenses

       Net Income


    THE STATEMENT OF RETAINED EARNINGS: The balance sheets can reveal if retained earnings increase or decrease, in response to events that impact income. The retained earnings can also be reduced by dividends paid to shareholders. The statement of retained earnings provides a succint reporting of these changes in retained earnings form one period to the next. In essence, the statement is nothing more than a reconciliation or "bird's-eye view" of the bridge between the retained earnings amount appearing on two successive balance sheets:

    Statement of Retained Earnings
    For the Year Ending December 31, 2009
    Retained earnings - January 1, 2009
       Plus: Net income
       Less: Dividends
    Retained earnings - December 31, 2009

    THE BALANCE SHEET: The balance sheet focuses on the accounting equation by revealing the economic resources owned by an entity and the claims against those resources (liabilities and owners' equity). The balance sheet is prepared as of a specific date, whereas the income statement and statement of retained earnings cover a period of time. Accordingly, it is sometimes said that balance sheets portray financial position (or condition) while other statements reflect results of operations. America's balance sheet is as follows:

    Balance Sheet
    December 31, 2009


       Accounts receivable


       Other assets

       Total Assets


       Salaries payable

       Accounts payable

       Total Liabilities

    Stockholders' Equity

       Capital stock

       Retained earnings

       Total Stockholders' Equity

    Total Liabilities and Equity


    STATEMENT OF CASH FLOWS: The statement of cash flows details the enterprise's cash flows. This operating statement reveals how cash is generated and expended during a specific period of time. It consists of three unique sections that isolate the cash inflows and outflows attributable to (a) operating activities, (b) investing activities, and (c) financing activities. Notice that the cash provided by operations is not the same thing as net income found in the income statement. This result occurs because some items hit income and cash flows in different periods. For instance,  if a companny generates income from a service provided on account, the transaction will increase income without a similar effect on cash.
    Suffice it to say that the underpinnings of the statement of cash flows require a fairly complete knowledge of basic accounting. The following is the statement of cash flows for America Corporation:

    Statement of Cash Flows
    December 31, 2009
    Operating activities

       Cash received from customers
       Cash received from interes

       Cash paid for salaries

       Cash paid for rent

       Cash paid for other items

            Cash provided by operations

    Investing activities

       Purchase of land

    Financing activities

       Payment of dividends

       Decrease in Cash

    Cash, January 1

    Cash, December 31


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