Financial Statements
Amber Khan
University of Phoenix
Principles of Accounting 1
ACC-290
Jean Balla
May 9, 2012
Financial Statements Identify the four basic financial statements The four basic types of financial statements are balance sheet, income statement, statement of owner’s equity, and lastly statement of cash flow ("The Four Financial Statements", 1999-2010). Describe the purpose of each of the four financial statements.

A balance sheet is used to summarize the finances of a company during a specific period of time. The sum of company’s liabilities and the owner’s equity should be equal the assets and finding the balance between the two is why this report is called a balance sheet. An explanation of the components of a balance sheet could be: Assets = Liabilities + Equity ("The Four Financial Statements", 1999-2010). An income statement is a representation of company’s profit or loss. The statement includes figures from sales and expenses. The difference between revenue and expenses is the company’s net income. An income statement is usually compiled monthly to keep track of the company’s progress. The purpose of owner’s equity statement is to compare owner’s equity from the start of the period to the end of that period. Owner’s equity combines information from both the income statement and balance sheet as an owner’s equity is determined by adding the investments and income and subtracting this figure from withdrawals. According to "The Four Financial Statements" (1999-2010), "For a corporation, substitute “Dividends Paid” for “Withdrawals”. The stockholders equity in a corporation is calculated as follows:

Common stock (recorded at par value) + Premium on common stock (issue price minus par value) + Preferred Stock (recorded at par value) + Premium