Financial PuzzleFINANCIAL STATEMENTS

By PresenterMedia.com

Financial PuzzleFINANCIAL STATEMENTS

By PresenterMedia.com

STATEMENT OF CASH FLOWS - Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time (Cash basis).

How are Financial Statements prepared?

INCOME STATEMENT - Indicates revenues less expenses = net income for a period of time

STATEMENT OF RETAINED EARNINGS - Indicates changes in Owner’s Equity for a period of time

BALANCE SHEET - Indicates the ending balances of assets, liabilities, and owners’ equity at a point in time

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• Examples of accounts:• Revenues:• Sales, Fees• Expenses:• Cost of Goods Sold,• Salaries, Rent, Utilities,

• Depreciation, Interest

Income Statement- Indicates revenues less expenses = net income for a period of time

• Beginning Balance: (if any)

• Add: Net income or

• Subtract : Net loss

• Add: Owner Contributions

• Less: Dividends

• = Ending Balance

Statement of Retained Earnings- Indicates changes in Owner’s Equity for a period of time

3 Categories:

• Operating

• Investing

• Financing

Statement of Cash flowsIndicates cash inflows and outflows from operating, investing, and

financing activities for a period of time (Cash basis).

• Operating – Cash in and out from operating activities

• Cash received from customers• Cash paid to employees• Cash paid to suppliers• Cash paid for rent• Cash paid for utilities

Statement of Cash flowsIndicates cash inflows and outflows from operating, investing, and

financing activities for a period of time (Cash basis).

INVESTING ACTIVITIES

. Purchase and sale of long-term assets

• Examples:• Cash paid for Car• Cash paid for Computer• Cash received for Car• Cash received for Computer

Obtaining cash or other resources to pay for investments in long term assets.

• Examples: • Cash received from

borrowing a loan• Cash paid to payoff loan• Cash paid to owners

(shareholders) dividends• Cash received from owners

(investing in the business)

FINANCING ACTIVITIES

Statement of Cash flowsIndicates cash inflows and outflows from operating, investing, and financing activities

for a period of time (Cash basis).

• Assets = Liabilities + Owner’s EquityAssets:• Cash, Accounts Receivable, Supplies,• Prepaid Assets (Insurance), Inventory,• Car, Accumulated Depreciation – Car

Liabilities:• Accounts Payable, Interest Payable, Utilities Payable,• Notes PayableOwner’s Equity:• Capital, Withdrawals/Drawing

Indicates the ending balances of assets, liabilities, and owners’ equity at a point in time

Balance Sheet

YOU OWE

YOU HAVE

YOU OWN