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Ch 2: Financial Statements in Accounting

About This Chapter

Watch informative video lessons and find out about the different aspects of financial statements. Learn about income statements, cash flow, balance sheets and more.

Financial Statements - Chapter Summary and Learning Objectives

Accounting is much more than just adding and subtracting numbers. There are various documents that must be kept and different figures that must be worked with. It is essential that the person doing the accounting work understands all the forms, vocabulary and numbers that he or she is working with. In this chapter, our lessons will introduce you to financial statements that are used in financial accounting. You will get to study these various statements to learn what they look like and how they are used. Some of the things you can expect to learn about include:

  • The purpose of financial statements
  • The components of an income statement
  • The format of a balance sheet
  • Key principles of accounting
  • The purpose of an external audit
  • How to prepare financial statements

VideoObjective
What Are the Financial Statements? - Definition, Purpose & Importance Learn about the purpose and importance of financial statements in business.
The Balance Sheet: Purpose, Components & Format Explore the purpose and components of the balance sheet.
What Is an Income Statement? - Purpose, Components & Format Examine the purpose and components of the income statement.
The Statement of Cash Flows: Purpose, Format & Examples Discover the purpose and components of the statement of cash flows.
The Purpose of Notes on Financial Statements Learn about the purpose of notes made on financial statements.
How To Prepare Basic Financial Statements Study how to prepare basic financial statements.
External Audits of Financial Statements Find out about the purpose of having an external audit of financial statements.
The Fundamental Principles of Accounting Take a look at several key principles of accounting, including objectivity, assumption of an arm's length transactions, cost, going-concern, monetary measurement concept, revenue recognition, and separate entity principles.

9 Lessons in Chapter 2: Financial Statements in Accounting
What Are Financial Statements? - Definition, Purpose & Importance

1. What Are Financial Statements? - Definition, Purpose & Importance

Financial statements are big players in the world of accounting. In this lesson, you will be introduced to each of the financial statements. You will also learn what their role is in the accounting industry, who they are important to and why they are important.

The Balance Sheet: Purpose, Components & Format

2. The Balance Sheet: Purpose, Components & Format

There are four financial reports that make up a group known as the financial statements. We will take a walk with one of those reports - the balance sheet - and learn what it is, what items are included on it and what its role in the group is.

What Is an Income Statement? - Purpose, Components & Format

3. What Is an Income Statement? - Purpose, Components & Format

There are four financial reports that are created during the accounting cycle. These four reports make up what is commonly known as the financial statements. In this lesson, we will focus our attention on the income statement. We will learn what the income statement is, what its role in the financial statements is and why it is important in accounting.

The Statement of Cash Flows: Purpose, Format & Examples

4. The Statement of Cash Flows: Purpose, Format & Examples

There are four financial reports that are required in financial statements. In this lesson, you will learn about the fourth and final report - the statement of cash flows. You'll learn what the makeup of the statement is, its purpose, and why it is important to users of the financial statements.

The Purpose of Notes on Financial Statements

5. The Purpose of Notes on Financial Statements

Financial statements are very important in accounting and finance. In this lesson, you will learn about notes to the financial statements, what information they may give, and why they are important to financial statement users.

Preparing the Basic Income Statement and Statement of Retained Earnings

6. Preparing the Basic Income Statement and Statement of Retained Earnings

Preparing financial statements can be tricky. In this lesson, we are going to talk about how to prepare the first two basic financial statements: the income statement and the statement of retained earnings.

How to Prepare the Basic Balance Sheet and Statement of Cash Flows

7. How to Prepare the Basic Balance Sheet and Statement of Cash Flows

There are four reports that make up the financial statements. In this lesson, we will talk about how to create the balance sheet and the statement of cash flows. You will learn how to format the reports, as well as what information is reported on them.

External Audits of Financial Statements

8. External Audits of Financial Statements

Financial statements are one of the most heavily relied upon group of reports in the business world, and they must be accurate and reliable. In this lesson, you'll learn about financial statement audits, who performs them, and why they are important.

The Fundamental Principles of Accounting

9. The Fundamental Principles of Accounting

Accounting is an art, but just as with any form of art, you need the right tools to make your masterpiece. For accounting, those tools are the seven major accounting principles. In this lesson, you will learn what those principles are and what they are used for.

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