The Four Core Financial Statements

There are the four core financial statement. 1st is The Income Statement, 2nd is The Statement of Retained Earning, 3rd is Balance Sheet 4th is The Statement of Cash Flows. All four core financial statements are prepared by company for showing its financial and income position. All the shareholders and creditors take important decisions after watching these statements deeply.

1. Income statement 

Income statement shows the result of business's operation. In income statement, we compare the revenues and expenses of business. Excess of revenue over expenses will be net income. If there is excess of expenses over incomes, it will be our net loss.

2. The Statement of Retained Earning 

The statement of retained earning shows the changes in retained earning from one period to another period. It starts by opening balance. We will add current year's net income. We will deduct current years dividend. Balance will be closing balance of retained earning which will show in the reserve and surplus in the balance sheet's liability side.

3. Balance Sheet 

Balance sheet show the total assets and liabilities of company. Right side, we show all the assets. Left side, we show all the liabilities. Balance sheet is prepared at specific date because after each day, figures of asset or liability may change. It is not prepared for the period.

4. The Statement of Cash Flows 

Statement of cash flows is that core financial statement which shows the cash inflow and cash outflow of business. We calculate net cash flow in three main activities. One is operating activities, second is investing activities and third is financial activities. In operating activities, we will include only cash and operational related activities. All those which are non-cash or non-operation will not include in it. After this, we will calculate the net flow from investing and financial activities. 






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Accounting Education: The Four Core Financial Statements
The Four Core Financial Statements
Accounting Education
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