Financial Accounting For Dummies

Chapter 3

Introducing the Big Three Financial Statements

In This Chapter

Realizing why the financial statements matter

Reflecting a company’s financial position: The balance sheet

Offering a short-term scorecard: The income statement

Reporting cash moving in and out: The statement of cash flows

This chapter provides a brief overview of the three key financial statements: the balance sheet, income statement, and statement of cash flows. (Later in the book, I go into much more detail about each one.) If you’re going to be an accountant, you have to get to know financial statements backward and forward. To get you moving in the right direction, I show you the purpose of each financial statement and which accounts show up on each. I also offer a thumbnail sketch of how accounts on one statement interact with accounts on another.

You find out about the three balance sheet components: assets, liabilities, and equity. I also discuss the various sections on the income statement, including the difference between revenue from operations and other gains and losses. You learn why a statement ...