Chapter 1.

Business Decisions & Financial Accounting

Accounting Equation

Income Statement (P&L statement, Statement of Income, Statement of Operations)

REVENUE – EXPENSES = NET INCOME
Statement of Retained Earnings
A full-blown statement is the Statement of Stockholders’ Equity (used by large corporations).
Beg. Bal. RETAINED EARNINGS + NET INCOME – DIVIDENDS = End. Bal. RETAINED EARNINGS

Balance Sheet (Statement of Financial Position): A=L+SE

ASSETS = LIABILITIES + STOCKHOLDER’S EQUITY
The Statement of Cash Flow

Summary of the four basic Financial Stamens

Relationship among Financial Statements

PRACTICE EXERCISE PB1-1

1. Prepare an Income Statement for year ended December 31

2. Prepare a statement of Retained Earnings for the year ending December 31
3. Prepare a Balance Sheet statement at December 31
PB1-1. SOLUTION
3-a.
3-b. Statement of Cash Flow