1. 1.01 Generally Accepted Accounting Principles – Financial Statements
GAAP PowerPoint #4

2. What are Financial Statements?
A formal record of the financial activities of a business
Includes four basic financial statements:
Balance Sheet (Statement of Financial Position)
Income Statement (Statement of Comprehensive Income)
Statement of Cash Flows
Statement of Changes in Equity

3. Balance Sheet
Reports a company’s financial position/condition at a given point in time
Reports on:
Assets
Liabilities and
Equity
Details about cash in bank, amounts owed to creditors, and value of company’s assets.

4. Income Statement
Reports on a company’s income and expenses over a given period of time
Reports on
Revenue (income)
Expenses
Shows a company’s profit or loss over a given period of time

5. Statement of Cash Flows
Reports on a company’s cash flow activities into and out of the business from:
Operating Activities
Investing Activities and
Financing Activities
Shows how changes in the balance sheet and income statement affect cash and cash equivalents

6. Statement of Equity
Reports the changes in the company’s equity throughout the reporting period
Reports
profit or loss from the company,
dividends paid, and
other items that are debited/credited to retained earnings

7. Questions for Understanding/Discussion
Explain the purpose of the Balance Sheet.
Explain the purpose of the Income Statement.
Explain the purpose of the Statement of Equity.
Explain the purpose of the Statement of Cash Flows.