FINANCIAL STATEMENTS

Summaries of financial activities are called financial statements which are prepared on a regular basis at the end of an accounting period. The accounting period typically is one year; however, it can be any length of time for which records are maintained. Usually the minimum is one month and the maximum length of time is one year for financial statements. There are several financial statements. You are going to prepare the
Income Statement, Statement of Owner's Equity,
and
Balance Sheet.
These must be completed in that order. Notice the page in your book that shows the three statements and how the information goes from one source to another. It is very important to always check your numbers since an incorrect number will affect more than one statement.

income Statement
This is a summary of a business's revenue and expenses for a specific period of time. It only shows revenue and expenses. These should be listed in order from largest to smallest. (This should be done in this chapter because accounts are not given account numbers.)
Net Income
is realized when revenue exceeds expenses.
Net loss
is realized when expenses exceed revenue.
Statement of Owner's Equity
 This is a summary of the changes that have occurred in the owner's equity during a specific period of time. This statement will show either an increase or decrease in the capital account.
Balance Sheet
 This statement is a listing of the firm's assets, liabilities, and owner's equity at a specific point in time. Total Assets must equal the addition of Liabilities and Owner's Equity.
NOTE:
Be sure that you are looking carefully at the examples given in the book when completing your assignments. You must write legibly and use a ruler to draw the lines. Notice that there are double rules to show that items have balanced. Be sure to read and study the Summary and Key Terms at the end of each chapter.