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Common Financial Reports: Income Statement

Income statements, statements of capital, balance sheets, and cash-flow statements are four common financial reports that accountants prepare at the close of an accounting period. An income statement lists revenues and expenses to show net income or loss. A statement of capital tracks changes to an owner's capital account over time. A balance sheet lists assets, liabilities, and owners' equity to show a company's financial position at a point in time. A cash-flow statement shows all sources and uses of cash during an accounting period.

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30 views2 pages

Common Financial Reports: Income Statement

Income statements, statements of capital, balance sheets, and cash-flow statements are four common financial reports that accountants prepare at the close of an accounting period. An income statement lists revenues and expenses to show net income or loss. A statement of capital tracks changes to an owner's capital account over time. A balance sheet lists assets, liabilities, and owners' equity to show a company's financial position at a point in time. A cash-flow statement shows all sources and uses of cash during an accounting period.

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Fiantiayu efandi
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Common Financial Reports

During the accounting cycle, accountants track, organize and record the financial
dealings of a company. At the close of each period, accountants use the information they’ve
gathered to prepare financial statements. Income statements, statements of capital,
balance sheets and cash-flow statements are four common financial reports.

Income Statement

An income statement is a type of summary flow report that lists and categorizes the various
revenues and expenses that result from business operations during a given period — a year,
a quarter or a month. The difference between revenues and expenses represents a
company’s net income or net loss. Income statements are important to business owners
because they represent the bottom line.

Statement of Capital

The statement of capital shows changes in owners’ capital accounts over time. If you’re a
business owner, your capital account represents how much of your company you own. At
the close of the accounting cycle, any net income becomes yours. Whether you reinvest it in
the business, use some of the profit as personal income or withdraw all of it, the owner’s
statement of capital will reflect any changes to the capital account.

Statements of capital typically are prepared after the income statement. Before accountants
can make adjustments to an owner’s capital account, they need to know whether a
company has a net income or net loss.

Balance Sheet

The balance sheet is based on this equation: assets = liabilities + owners’ equity. It lists
everything your company owns (assets), everything your company owes to creditors
(liabilities) and the value of your ownership stake in your company (owners’ equity, or
capital).
Unlike the income statement and statement of capital, which show changes in a business’s
financial condition over time, the balance sheet — also referred to as a statement of
financial condition — provides a snapshot of a company’s financial position at a specific
point in time.

Cash-Flow Statement

The cash-flow statement shows all sources and uses of a company’s money during the
accounting period. Sources of cash listed on the statement include revenues, long-term
financing, sales of non-current assets, an increase in any current liability account or a
decrease in any current asset account. Uses of cash include operating losses, debt
repayment, equipment purchases and increases in any current asset account.

Because it shows whether a business’s cash flow is increasing or decreasing, a cash-flow


statement is useful for warding off cash-flow problems.

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