What accounts are contained in the four financial statements

I need help with a response to the professor on my discussion post. I’m including a reference of the text we are using. Here is my discussion post as well.

What accounts are contained in the four financial statements?
The balance sheet provides economic information to financial consumers; the income statements provide information about the company’s profitability for a specific period; the cash flow statements provide business reports and cash receipts; and the statements of equity and cash payments show changes in the owner’s capital account ( Miller-Nobles et al., 2018 ). As a result, the four financial statements comprise accounts for assets, equity, revenue, dividends, expenses, and liabilities.

What order are the financial statements prepared?
The financial statements must be made in the following sequence because some of the financial statements incorporate information from other statements and must be prepared in this order to be properly prepared: The first is the income statement, followed by the equity statement, the balanced sheet, and finally the cash flow statement.

When the financial statements are prepared, which amounts are transferred from one statement to the next, and state how this transferred amount is used in the next statement?
Income statements detail a company’s expenses and revenues over a certain time period. First, the revenues are stated, followed by the expenses, and finally, the total is shown at the bottom. The income statement amounts are used to display a summary of the owner’s investment in the business (Miller-Nobles et al., 2018). It displays the capital invested in the business, as well as the net loss or income for a given time period. The balance sheet assists in listing items such as liabilities and assets that are not included in the income statement. To demonstrate the accounting formula: Assets=Owners’ Equity+Liabilities, the Owners’ Equity is carried to the balance sheet.

Reference

Miller-Nobles, T. L., Mattison, B. L., & Matsumura, E. M. (2018). Horngren’s accounting (12th ed.). Retrieved from https://pearson.com

Hello Sonia,

Excellent work. I like your summary and your citing sources to support your discussion. Yes, I agree that the order of the financial statements starts with the Income Statement, Statement of Owner’s Equity, Balance Sheet, then the Statement of Cash Flow. The key is to close the income statement by transferring the net income or loss to the Statement of Owner’s Equity, which appears on the Balance Sheet.

The Cash flow statement shows cash activities from operating, investing, and financial activities. It is prepared to last because you need the changes in accounts from all financial statements to prepare it. The purpose of the cash flow is to adjust net profit to reflect cash transactions both in and out. For example, if you sell something on credit for $100. Your entry would have increased revenues and accounts receivable (A/R) by $100. On the Cash Flow, you will reduce net income by $100 because cash still needs to be collected. In other words, your income on a cash basis is overstated by $100. Hence an increase in A/R has reduced the cash flow from operating activities.

Regards, Dr. Millstone

Paper Format: APA

Answer preview to What accounts are contained in the four financial statements

APA

257 words