Introduction to Financial Statements

Accounting

Gather and communicate what it means

Internal Users

Actually work for the company

External users

Investors, bankers, suppliers, regulatory authorities

Revenue

Value of products and services sold

Cost of sales

Cost to make product like making a burrito

What is the relationship between revenue and cost of sales

Direct (more burritos sold=more tortillas bought)

Income statement

Company's operational performance (did they make profit in a given period?)

Financial statements

What do they do with profit? Do they keep or give dividend (owners $) this also shows the change in all time total profits since company began

Balance sheet

What the company owns

Cash (money in bank acc)

This is what pays bills or paychecks

Accounting receivable

This is what the customers owe such as a credit card

Inventory

What company intends to sell such as lettuce

Property and equipment

Long term assets such as buildings or land

Accounts payable

Less than a year, it's what we owe a supplier or a paycheck

Notes payable

Money borrowed from the bank this is long term

Stockholders equity

Common stock (original investment) and retained earnings

Retained earnings

Net income minus dividends