About This Chapter
Understanding Financial Statements - Chapter Summary
The lessons in this chapter explain the importance of several types of financial statements as well as demonstrate how to prepare and interpret them. Employees who watch these videos will learn about the following:
- The role of source documents in accounting
- Ways to create an adjusted trial balance
- How to prepare statements of retained earnings and basic income statements
- Preparation of a basic balance sheet and statement of cash flows
- What financial statement ratios are and why they matter
These lessons average about five minutes in length and can be watched anytime on a computer or mobile device. If you include them as part of a group corporate training session, the quizzes that accompany each lesson can provide an excellent springboard for discussion.
How It Helps
- Demonstrates essential skills: Watching videos and studying the examples our instructors have included will train employees in several important accounting skills, such as preparing balance sheets and statements of retained earnings.
- Ensures conformity: By providing these lessons, you can ensure that all employees have the same knowledge about financial statements and will follow the same procedures in preparing them.
- Improves productivity: Training several employees in financial statements means work can be divided among more people and provides trained backups when employees are absent or positions are vacant.
After watching these lessons, your employees should be able to:
- Define source documents in accounting
- Understand how to create an adjusted trial balance
- Prepare an income statement and a statement of retained earnings
- Create and format a balance sheet and a statement of cash flows
- Explain the importance of financial statement ratios in determining company performance
1. Source Documents in Accounting: Definition and Purpose
Do you know what role source documents play in accounting? If not, don't worry; by the end of this lesson, you will. You will also learn the definition of source documents and see some common examples of source documents.
2. Adjusted Trial Balance: Definition, Preparation & Example
There are many steps in the accounting cycle that must be taken before a company's financial statements are prepared. In this lesson, we will be discussing one of those steps - creating an adjusted trial balance.
3. 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.
4. 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.
5. Financial Statement Ratios: Determining Company Performance
Have you ever wondered why the financial statements are so important to a company? In this lesson, you will learn about several financial statement ratios and how they help determine company performance.
6. Practical Application: Analyzing Financial Statements
Analyzing financial statements is a basic business skill that is fundamental to understanding an organization's position in the market. Despite an intimidating name, analyzing a financial statement is relatively straightforward.
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