Project 2
1. Project 2
1.15. Training Room Summary
Project 2: Financial Statements
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Training Room Summary
The most common financial statements that a business creates are an income statement, a balance sheet, and a statement of owner’s equity. These statements all report different financial information and together create a complete financial picture of a business.
The format of these statements is the same for any company and allows auditors, investors, bankers, or whoever is reviewing the statements to understand the business’s financial information.
An income statement reports the net income or the net loss for the fiscal period and would help reveal if the money a business is spending is more or less than the money it is making in revenue.
The balance sheet contains all of the balances in assets, liabilities, and owner’s equity accounts and allows the business to see its financial position on a specific date for all of the accounts on one piece of paper.
The statement of owner’s equity is a detailed report of the worth of the business, including the money from investments and net income, as well as the money subtracted because of withdrawals by the owner or net loss.
Now that you have completed the financial statements at the end of the fiscal period, it is time to close the temporary capital accounts of revenue and expenses to prepare these accounts for the next fiscal period.
Continue to Project 3 to learn how to journalize closing entries and post these amounts to update the ledger.