Financial Statements 101

For all of us who fell asleep in our accounting class, here is a high level overview of the most common elements in a set of financial statement. Generally speaking, a set of financial statements is comprised of:

  • an income statement,

  • a statement of retained earnings,

  • a balance sheet,

  • and a statement of cash flows.

The income statement summarizes the income for the year; the statement of retained earnings shows the reconciliation of opening and ending retained earnings; the balance sheet summarizes the assets, liabilities and equity at the end of the year; the cash flow reconciles opening and ending cash balances, summarizing operating, investing and financing cash flow activities throughout the year.