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Balance Sheet/Statement of Financial Position

A company’s balance sheet, or statement of financial position, is a financial statement which details the assets, liabilities, and stockholders’/owner’s equity at a specific point in time. Note that other financial statements detail information over periods of time. The balance sheet is used to define a company’s working capital, which is current assets minus current liabilities. The amount of […]

Income Statement

An income statement details the revenues and expenses of a company during a specified period such as a month, quarter, or year. A balance sheet, on the other hand, details a single point in time. It details how revenues and expenses are changed into net income. An income statement is prepared for managers and investors, to determine the […]

Cash Flow Statement and Activities

The cash flow statement details the flow of cash in and out of a business. This statement is unique among the financial statements because it records financial information as it occurs, not when revenues are earned yet not received. For example, the balance sheet and income statement both utilize the accrual method of accounting. Revenues are reported on […]

Statement of Stockholders’ Equity

A statement of stockholders’ equity lists any changes made in the stockholders’ equity section of a balance sheet over a period of time and is presented along with an income statement and statement of cash flows for an accounting period. The statement may also detail additional activity related to stockholders’ equity during that period of time, including stock […]

Links between the Balance Sheet and Income Statement

Comparing a company’s balance sheet and income statement assures that the net income listed in the income statement is accurate. When utilizing the double entry method of accounting, the links between the two become clear. Revenues increase net income, while expenses decrease net income. Positive net incomes increase stockholders’/owner’s equity, as reported in the income statement. Negative net incomes […]

Bank Reconciliation

In bank reconciliation, financial statements are reviewed to be certain that all information is accurate, covering amounts spread across accounts. In this process, the balance in a bank statement is compared to the balance listed in a business’s general ledger. If there are any differences between these two amounts, the reason for this must be determined. To reconcile a […]

Petty Cash and the Imprest System

Petty cash involves expending small amounts of cash for small owed amounts where it would not be prudent to write a check. For such a small amount, the added cost and inconvenience of writing and cashing a check would not be preferred. Petty cash is involved in payments such as small amounts of office supplies, […]