A complete set of financial statements comprises: (1) an income statement, recent standards now require a statement of comprehensive income, (2) a statement of changes in equity, (3) a balance sheet, also known as statement of financial position, (4) a statement of cash flows, and (5) notes to financial statements or supplementary notes.
Chapter VI provides step-by-step tutorials in preparing financial statements. We will focus on the first three financial statements, and for a service type business.
The preparation of financial statements is easy once you've mastered the accounting elements and know the different accounts that comprise them. Businesses today have automated accounting systems wherein financial statements can be prepared with a few clicks of a button.
However, as accountants we need to really understand how they are made. This way, we will be able to interpret and appreciate financial statements better.
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