Balance Sheet
The first format of the financial statements is the balance sheet. Balance sheet is a
sheet on where the business would present all their liabilities. In other words, everything
what they own and owes. It reports assets and claims to those assets at a specific point of
time. There are subdivided on two categories; claims of creditors, known as liabilities
and claims of owners, known as stockholders’ equity. The relationship between both
categories are where the balance sheet comes from and the assets must be in balance.
Income statements
On this format, the business will show how successfully has been doing during a
period of time. It reports their revenues and expenses, their success or failure. The net
income is determined by deducting expenses from revenues.
Retained earnings statements
This format will indicate how much of previous income was distributed to the owners
on their business in the form of dividends and how much was retained to allow the
business growth future. Its shows the amount of net income retained by the company
during the period of time. Also, the retained earnings it can be monitored so the financial
statements users can evaluate the dividend payment practices.
Statement of cash flows
The purpose of the statement of cash flows is to provide financial information about
the cash receipts and cash payments of a business for a specific period of time. In
addition, the statements cash ...