Financial Records and Financial Statements Chapter 12 Section 2

Financial Records Types of Records Used to record and analyze the financial performance of a business. Types of Records Asset Records – name the buildings and equipment owned by the business, their original and current value, and the amt. owed if money was borrowed to purchase the assets

Depreciation records - identify the amt Depreciation records - identify the amt. assets have decreased in value due to their age and use. Inventory records – identify the type and number of products on hand for sale. Records of Accounts – identify all purchases and sales made using credit. Accts. Payable identifies companies where credit purchases were made Accts. Receivable identifies customers who made purchases using credit

Cash Records - list all cash received and spent by the business. Payroll Records – contain information on all employees of the company, their compensation, and benefits. Tax Records – shows all taxes collected, owed, and paid.

Financial Statements Three most important elements of a company’s financial strength are its Assets: what a company owns liabilities: what the company owes owner’s equity: the value of the owner’s investment in the business

The Balance Sheet Houses the assets, liabilities, and owner’s equity for a specific date Prepared every six months or once a year Left side: list all assets (Current & long-term) Right side: list liabilities ( Current & long-term) and owner’s equity

The Income Statement Reports the revenue, expenses, and net income or loss from operations for a specific period Covers a month, six months, or a year