Financial Statements are the end result of financial accounting
and are used as scorecards to evaluate the financial performance
of a business.
Financial Statements -Accounting reports prepared periodically to inform the owner, creditors, and other interested parties as to the financial condition and operating results of the business.
The four basic financial statements are:
Balance Sheet -The financial statement which shows the amount and nature of business assets, liabilities, and owner’s equity (capital) as of a specific point in time. It is also known as a Statement Of Financial Position or a Statement Of Financial Condition.
Income Statement -The financial statement that summarizes revenues and expenses for a specific period of time, usually a month or a year. This statement is also called a Profit and Loss Statement or an Operating Statement.
Capital Statement -The financial report that summarizes all the changes in owner’s equity (capital) that occurred during a specific period.
Cash Flow Statement -The financial statement that reports the sources and uses of cash for a specific period of time, normally a year.
The definitions and terminology presented in this lesson are by no means all the terminology that is used in the field of accounting, but are some of the major terms that you might encounter and are needed to complete this tutorial.
Don't Panic if you don't understand every definition that has been presented in this lesson. I tossed you in the water to get you wet, but I'm not going to let you drown. Swimming instructions will be provided in other lessons and your lifeguard (me) will be watching out for you. The lessons that follow will clear up some of the more complex definitions and concepts with examples and additional discussions.