learning accounting -lesson 2

Understanding Financial Statements

The financial statements shown on the next several pages are for a sole proprietorship, which is a business owned by an individual. Corporate financial statements are slightly different. The four basic financial statements are the income statement, statement of owner's equity, balance sheet, and statement of cash flows. The income statement, statement of owner's equity, and statement of cash flows report activity for a specific period of time, usually a month, quarter, or year. The balance sheet reports balances of certain elements at a specific time. All four  statements have a three-line heading in the following format

Income statement:

 The income statement, which is sometimes called the statement of earnings or statement of operations, is prepared first. It lists revenues and expenses and calculates the company's net income or net loss for a period of time. Net income means total revenues are greater than total expenses.Net loss means total expenses are greater than total revenues. The specific items that appear in financial statements are explained later.

The Greener Landscape Group Income Statement For the Month Ended April 30, 20X2 Revenues     Lawn Cutting Revenue $845 Expenses     Wages Expense $280     Depreciation Expense 235     Insurance Expense 100     Interest Expense 79     Advertising Expense 35     Gas Expense 30     Supplies Expense 25       Total Expenses 784 Net Income $ 61