Introduction to Financial Statements

Flashcards covering key terms and definitions related to financial statements and accounting principles.

Income Statement

A summary of the revenue and expenses for a specific period of time, such as a month or a year.

Statement of Stockholders' Equity

A summary of the changes in stockholders' equity that have occurred during a specific period of time.

Balance Sheet

A list of the assets, liabilities, and stockholders’ equity as of a specific date.

Statement of Cash Flows

A summary of the cash receipts and cash payments for a specific period of time.

Profit

The difference between the amounts received from customers for goods or services and the amounts paid for inputs.

Profitability

Earning a sufficient return to maintain owner interest.

Liquidity

Having enough cash to pay debts as they come due.

Dividends

Distributions of earnings to stockholders, which reduce the amount of retained earnings.

Net Income

The positive difference when revenues exceed expenses.

Net Loss

The negative difference when expenses exceed revenues.

Revenues

Increases in stockholders’ equity that result from operating a business.

Expenses

Decreases in stockholders’ equity that result from operating a business.

Multiple-Step Income Statement

An income statement format that includes sections for gross profit, operating income, and net income.

Single-Step Income Statement

An income statement format that does not separate operating and non-operating income.

Assets

Resources owned by a business that are expected to bring economic value.

Liabilities

Obligations of a business to pay debts.

Equity

The residual interest in the assets of the entity after deducting liabilities.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company.