Financial Statements

A financial statement is record of all financial activities present within a corporation.  This includes items such as accounts receivables, accounts payable, investment incomes, expenses, and all financial and inventory losses.  It is very important that every transaction is correctly recorded and on entered in a timely manner to ensure that a company’s financial balance is maintained accordingly.  The overall objective of financial statements is to monitor the financial condition of a company.  The statement of financial position determines this financial condition.  Both the performance of a corporation and the company’s position are ascertained from the figures that are reported on the financial statements.

There are four basic financial statements, which are needed in order to keep track of all company transactions:

Balance Sheet – This worksheet keeps a record of all transactions and balances for asset accounts, capital stock, retained earnings, and liability accounts.  It is referred to as a balance sheet because it mirrors an accounting identity.

Income Statement – The income statement reports all transactions involving expenses, revenue, and both capital gain and capital loss.

Statement of Cash Flow – This worksheet illustrates all incoming and outgoing money along with the reasoning for each transaction recorded.

Statement of Retained Earnings – The retained earnings statement list the retained earnings from the beginning or the fiscal period as well as the earning at the end of the fiscal period.  In order to create a complete retained earnings statement one must use information from both the income statement and the balance sheet.  Without these two statements, the retained earnings worksheet cannot be established.