ACCTG 101 Lecture Notes - Lecture 2: Income Statement, Financial Statement, Retained Earnings
Document Summary
Linking the income statement and the balance sheet. The changes in retained earnings part of the statement of changes in equity links the income statement and the balance sheet. The statement of changes in retained earnings provides this link by including net profit or loss in the calculation of retained earnings, which is then reported on the balance sheet. This means that when preparing financial statements for any business, the income statement must be prepared first, follow by the statement of changes in equity and the the balance sheet. Lo5 reporting cash flows: the cash flow statement. A cash flow statement reports a business" cash inflows and outflows from its operating investing and financing activities. Most business must raise fund to begin. Borrowing money from creditors and receiving contributions from investors are both ways to finance a business" operations. Therefore, generating and repaying cash from creditors and investors are considered financing activities.
