Question

Identify and explain what are the four financial statements.

1.Income Statement

2. Statement of Retained Earnings

3. Balance Sheet

4. Statement of Cash Flow

What are the types of accounts included on each statement.

Identify the relationship between each statement.

Cite your sources (APA).

Answer 1

Four financial statements are 1. Income statement 2. statement of retained earnings 3. Balance sheet Ho statement of cash flow- 1. Income statement represents expenses, revenues, porofits or losses during a reporting period. operating results are represented in income statement g. statement of retained earnings shows the changes in carcity during the reporting period. changes in earuity is due to sale or repurchase of shares, dividend payments, profit/ loss etc. 3. Balance sheet presents the assets, liabilities, earuity of an entity, There are specific formats in which the balona sheet should be presented, It provides the information about the liaciality of an organisation. 4. cash flow statement presents the cash in flows Ee cash out flows that occused during the reporting period when financial statements are presented to 3rd parties , cash flow statement will be included. -

includes Balance sheet y assets - liabilities J caurity income statement indudes » Income (eg sales, interest ) y expenses (eg depreciation, rent) Cash flow statement includes; > operating activity Investing activities - financing activitig - statement of setained earnings - Net pefit loss - share capital issued (repaid es dividend paid ete

Relation between encial statements Balance sheet Copening) income statement add profit dedo loss stak of y refained earnings add capital raised deduct dividend paid cash flow statement Gain/loss recognised disectly in Balance shead Cash flow used in investing activities Cash flow from earuity financing activity Closingt 1. The net poufit in income statement is added to detained earnings in Balance sheet. 2. The net profit also appears in Cash flow statement in operating activities. 3. The closing cach balance in Balance sheet also appears in statement of cash flows 4. purchase / sale of assets appears in Balance sheet (as asset addition / reduction) re also in in come statement as gain/ loss. The financial statements are highly inter related