Ch 5: Financial Statements, Balance Sheets & Income Statements

About This Chapter

Our subject-matter experts have created a series of lessons that are an introduction to financial statements, balance sheets and income statements. If you run into questions, you can access a feature that allows you to contact an expert.

Financial Statements, Balance Sheets & Income Statements - Chapter Summary and Learning Objectives

Knowledge of financial statements, balance sheets and income statements can determine the success or failure of a business. Our instructors have broken this subject matter into short lessons that make the material easy to absorb. The lessons include things like:

  • Financial statements, balance sheets, and income statements
  • Accrual accounting to make financial statements more useful
  • Statement of cash flows and statement of retained earnings
  • Non-current liabilities and notes receivable on a balance sheet
  • Cost of goods sold on an income statement
  • Challenges in measuring assets, liabilities and equities
  • Typical problems with financial information

Lesson Objective
What Are Financial Statements? - Definition, Purpose & Importance Distinguish how financial statements are key elements in the world of accounting.
The Purpose of Notes on Financial Statements Assess why how notes play an important role in financial statements.
Using Accrual Accounting to Make Financial Statements More Useful Justify the relationship of accrual accounting to making financial statements more useful.
The Balance Sheet: Purpose, Components & Format Point out the role of the balance sheet.
What Is an Income Statement? - Purpose, Components & Format Dissect the details of the income statement.
The Statement of Cash Flows: Purpose, Format & Examples Evaluate the purpose of the cash flows statement.
Statement of Retained Earnings: Definition, Formula & Example Appraise how the statement of retained earnings is used.
Preparing the Basic Income Statement and Statement of Retained Earnings Break down the preparation of basic income and retained earnings statements.
How to Prepare the Basic Balance Sheet and Statement of Cash Flows Conclude how to ready these two documents, the basic balance sheet and statement of cash flows.
Non-Current Liabilities on a Balance Sheet: Definition & Examples Evaluate how to include non-current liabilities as an important component of the health of the company.
How to Record Notes Receivable on a Balance Sheet Explain the recording of notes receivable.
Cost of Goods Sold on an Income Statement: Definition & Formula Analyze the cost of goods component of an income statement.
Typical Problems with Financial Information Classify typical problems with financial information.
Challenges in Measuring Assets, Liabilities & Equities Evaluate the challenges in measuring assets, liabilities and equities.

14 Lessons in Chapter 5: Financial Statements, Balance Sheets & Income Statements
Test your knowledge with a 30-question chapter practice test
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 Purpose of Notes on Financial Statements

2. 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.

Using Accrual Accounting to Make Financial Statements More Useful

3. Using Accrual Accounting to Make Financial Statements More Useful

What is the relationship between the financial statements and accrual accounting? Do you know? By the time this lesson is over, you will not only know what the relationship is between the two but also why that relationship is important.

The Balance Sheet: Purpose, Components & Format

4. 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

5. 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

6. 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.

Statement of Retained Earnings: Definition, Formula & Example

7. Statement of Retained Earnings: Definition, Formula & Example

Retained earnings are a critical part of the business life cycle. The statement of retained earnings calculates not only the cumulative amount of earnings but also the changes that have affected that amount during the past year.

Preparing the Basic Income Statement and Statement of Retained Earnings

8. 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

9. 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.

Non-Current Liabilities on a Balance Sheet: Definition & Examples

10. Non-Current Liabilities on a Balance Sheet: Definition & Examples

Non-current liabilities are an important component of the financial health of a company. In this lesson, you'll learn about non-current liabilities and where they fit into a balance sheet. A short quiz follows the lesson.

How to Record Notes Receivable on a Balance Sheet

11. How to Record Notes Receivable on a Balance Sheet

A note receivable is a written promise to pay a specified amount of money at an agreed-upon future date. In this lesson, you will learn how to record notes receivable on the balance sheet.

Cost of Goods Sold on an Income Statement: Definition & Formula

12. Cost of Goods Sold on an Income Statement: Definition & Formula

Just because you earn revenue doesn't mean you've made a profit. In this lesson, you'll learn about cost of goods sold, including where it fits on an income statement and how to calculate it. A short quiz follows the lesson.

Typical Problems with Financial Information

13. Typical Problems with Financial Information

The ultimate goal of an accounting professional is to provide accurate and reliable financial information to interested parties. In this lesson, we are going to discuss typical problems with financial information.

Challenges in Measuring Assets, Liabilities & Equities

14. Challenges in Measuring Assets, Liabilities & Equities

While it's pretty easy to figure out what is an asset and what is a liability, it is quite a bit harder to determine just how much each is worth. In this lesson, we look at the challenges of measurement in accounting.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
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Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
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