Preparing financial statements
The four financial statements are the income statement, the balance sheet, the statements of the changes in owner's equity, and the statement of the cash flows. Each of these statements are prepared to analyze the health of the business.
- The income statement states the net income or net loss for a period of time.
- The statement of the changes in owner's equity states the changes in the owner's capital account from the different transactions during a period of time.
- The balance sheet states the balances of the permanent accounts at the end of the period of time.
- The statement of cash flows states the amount of cash the business took in, the sources of cash, the amount of cash the business paid out, and the uses of cash.