financial statements for Santiago

Canyon College. After this short presentation, you should be able to

describe the four basic financial statements required

by Generally Accepted Accounting Principles, indicate the formulas for

each, the

order in which they prepared, and understand how they're all connected.

Companies prepare four basic financial statements from summarized accounting

data in accordance with GAAP. For this presentation, these financial statements

have been

simplified to show their

interrelationship. We'll start with the income statement,

the next will be the statement of retained earnings, the balance sheet

and the fourth will be the statement of cash flows. The first statement that

we're going to cover is the income statement.

The income statement reports revenues and expenses for a period of time

So here's a little example how that might look in a very simplified format.

So we're going to show the revenue or sales that the company might have

less any expenses and this company has net income which means the revenues

exceeded the expenses for the period.

If expenses exceed revenues the Company would have a net loss.

So the formula you're looking for on the income statement is basically

revenue minus expenses gets you to net income or net loss.

The next statement will show the changes

in retained earnings during the period.

The time period you'll notice is the same as what we covered during the

income statement. For this Company as a year ending

12 31 2015 and the formula will begin with the beginning retained earnings we'll

add or subtract any net income or net loss from the income statement

subtract the dividends getting us to an ending retained earnings,

that we are going to use for the next statement,

which is the Balance Sheet. This Balance Sheet

you'll notice is one day only, so it's reporting

assets and any claims to assets on a specific

point in time. So, this is the last day of the year in this example

and you can see that the formula is

assets followed by liabilities and equity.

And in order for this financial statement to balance, assets are

always going to equal liabilities plus equity. Yes, you can see the 800 total

assets

equals the 800 total liabilities plus equity.

and then the fourth statement, the Statement Cash Flows

will tell the reader where the cash come from during the period, how is it used

and what's the change

in the cash balance during the period. So for this fourth statement

the formula starts with beginning cash. Its going to add or subtract

any cash provided or used from operations, investing

or financing (and financing) and get

to the ending cash number. That was also the same

ending cash balance that you saw on the Balance Sheet

So the last slide I am going to go over is really going to point out

the inter-relationship between

all four of those statements and point out why we prepare them in order that we

did.

Because we really need to have one number from

the previous statement in order to complete the next statement.

So the first financial statement was the income statement

where we saw the net income during the period.

That net income was then brought to the retained earnings statement where we

reconciled

the changes in the equity balance during the period.

we got to an ending retained earnings number which we then needed

in order to complete our Balance Sheet, which was solving

a for that one day only. What are the assets, liabilities and equity that the company

has

and then are fourth statement, the Statement of Cash Flows

reconciled the change in cash during the period. So you'll notice that the

ending cash on the Balance Sheet

is the number that were reconciling to. We're

showing where the changes from the beginning cash to the ending cash and whether it

came from operating, financing

or investing during the period.

I hope you enjoyed this short presentation and we're going to spend a lot

more time

learning how to prepare the statements and

understanding the inter-relationship between them all. Again my name is Jennifer

Anderson for Santiago Canyon College

Thank you and have a great day!