Principles of Financial Accounting · free preview
The Four Financial Statements and How They Interrelate
Financial statements communicate performance and position through four ordered reports, the income statement, statement of owner's equity, balance sheet, and statement of cash flows, prepared after the business entity is separated from its owners.
1. Separate the business from its owners
Separate the business from its owners
2. The four statements in order
The four statements in order
3. Reading the income statement
Reading the income statement
4. How the statements interrelate
How the statements interrelate
5. Which statement comes first
Which financial statement is prepared first?
6. Business entity concept
What does the business entity concept require?
7. The corporation's trade-off
What is the main disadvantage of the corporate legal structure?
8. Where net income comes from
Which formula expresses the income statement calculation?
9. Number of financial statements
How many financial statements make up the complete set that accountants prepare for a period? Give the number only.
10. Elements of net income
Complete the formula. Net income equals ____ minus expenses.
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