The analysis of the transactions complete, what is the next step in the accounting process? How does an accountant present the results of the analysis? We now look at the financial statements.These business documents report financial information about the entity to persons and organizations outside the business.
The primary financial statements are the (1) balance sheet, (2) income statement, (3) statement of owner's equity,and (4) statement of cash flow.
The balance sheet lists all the assets, liabilities, and owner's equity at a point in time, usually the end of a month or a year. The balance sheet is like a snapshot of the entity. For this reason, it is also called the statements of financial position. A balance sheet is made up of two lists, placed side by side. On the left the company lists everything it owns, such as cash and "fixed assets" called property, plant, equipment, which include everything from buildings and trucks to tools, pencils, and copy machines. This list is labeled assets On the other side, the company lists its liabilities, consisting of all the claims to the company's assets, from creditors and from the company owners. The lists end up being exactly equal-whatever assets are not claimed by the company's creditors belong to the owners.
