Accounting For Dummies, 7th Edition

Chapter 2

Introducing Financial Statements

IN THIS CHAPTER

Identifying the information components in financial statements

Evaluating profit performance and financial condition

Knowing the limits of financial statements

Recognizing the sources of accounting standards

Chapter 1 presents a brief introduction to the three primary business financial statements: the income statement, the balance sheet, and the statement of cash flows. In this chapter, you get more tidbits about these three financials, as they’re sometimes called. Then, in Part 2, you really get the goods. Remember when you were learning to ride a bicycle? Chapter 1 is like getting on the bike and learning to keep your balance. In this chapter, you put on your training wheels and start riding. Then, when you’re ready, the chapters in Part 2 explain all 21 gears of the financial statements bicycle, and then some.

For each financial statement, we introduce its basic information components. The purpose of financial statements is to communicate information that is useful to the readers of the financial statements, to those ...