Accountants' Handbook Volume One: Financial Accounting and General Topics, Eleventh Edition

Chapter 10. FINANCIAL STATEMENTS: FORM AND CONTENT

Jan R. Williams, PhD, CPA

College of Business Administration University of Tennessee

INTRODUCTION

Financial statements are one of management's primary means of communicating with external parties about the financial activities of the enterprise. Through financial statements, interested parties outside a company are able to learn a great deal about the financial effects of business transactions and the accumulated resources and obligations of the reporting enterprise.

This chapter presents an overview of the form and content of financial statements as a means of introducing these important communication tools. The purpose is to introduce financial statements, to illustrate how they interrelate or articulate with each other, and to suggest the types of information that can be gleaned from them. Later chapters develop in more depth the specific content and underlying accounting principles of specific financial statements.

The following sections review the objectives of financial reporting, including financial statements, and identify the principles supporting the preparation of financial statements. Next there are individual reviews and illustrations of the primary financial statements—the balance sheet, the income statement, the statement of stockholders' equity, and the statement of cash flows. Articulation of financial statements is then covered, followed by a discussion of the role of supplemental and note disclosure. The chapter ends ...