financial accounting records thesins have a business and communicate this information to potential

investorsand creditorsthe output of the accounting process or the financial statementsan income
statement reports say businesses profitabilitystatement of retained earnings reports the change in
retained earnings forcorporationa balance sheet details the economic resourcesa and the claims on
those resourcesfinally a statement of cash flows summarizes the cash inflows and outflowsfor various
business activities the income statementwhich is sometimes called a statement of operations or a
P&L statementreports how profitable company ison a simple income statement they're just
toocategories accounts revenues and expensesthe difference between revenues and expenses is called
net incomethis occurs when a company has more revenuesthen expense net loss occurswhen a
company has more expense than revenue net income is one of the firstthings investors and creditors
look forin the financial statements the statement of retained earnings ispreparedafter the income
statement this is because information from the incomestatement is usedin the statement of retained
earnings retained earnings accounta name the name a bit represents exactly what it isthe portion of the
earnings that have been retainedby a company rather than being paidto investors in the form of a
dividend net incomefrom the income statement increases retained earningsand dividends decrease
retained earningsa balance sheet is sometimes called a statement of financial positionmeaning at any
point in time it tells us how many assets the companyhas how many liabilities or debts a company
handsand how much equity the stockholders have the most common form a balancesheetis the
classified balance sheet in this formatassets and liabilitiesare classified into two categories: currentand
long-term the easiest way to rememberif something is current or long-term is the one-year cut offless
than one year is current more than one year's long-termso current assetsare those assets that will
be collected in cashor used up in one year or lessyou can see some common examples on the slidelong-
term assets are those assets that areexpected to provide value into the future more than one yearand
you can see some common examples of thoseon the slide current liabilitiesare those debts so that will
be paid in one year or lessagain there are some examples listed on the slideand finally long-term
liabilitiesare those liabilities that are expected to be atake more than one year to pay off and again there
are some common examplesa listed there stockholders equityreports the total amount of equity the
stockholders have in the company iscommonly defieddivided into two categories are two sections
contributed capitalwhich is the section that reports common stockand retained earnings which is the
section reports theending retained earnings balance from the statement of retained earningsthe
statement of cash flows reports thatchange in cash for a reporting period by reporting cash receipts and
paymentsfrom three categories have activities operating activities section reportscash collectionand
payments from transactions related to theoperations in a businesslike buying & selling goods or
servicesinvesting activities section reportscash receipts and payments for transactions involvinglong-
term assets financing activities section reports canreceipts and payments for transactions involving long-
term liabilitiesand equity and that concludes this brief overview of the financial statementsyou learn
more about them and get a chance to prepare them in the futureI when we when we discuss the
accounting cycle