Four Financial Statements + Their Purpose and Timing; Ethics and Annual Reports

Income statement

Revenues, expenses, and net income or loss for a period of time.

Statement of retained earnings

Changes in retained earnings for the same period as the income statement.

Balance sheet

Assets, liabilities, and stockholders’ equity at a specific date.

Statement of cash flows

Cash sources and uses for a period of time; ending cash agrees to the balance

sheet.

Preparation order:

Income statement, statement of retained earnings, balance sheet, statement of cash

flows.

SOX

increased management accountability, penalties for fraud, auditor independence, and board

oversight.

Annual report components

financial statements, MD&A, notes, and the independent auditor’s report