Introduction to Financial Accounting

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Types of Financial Statements

Balance Sheet

Measures finances of a company at a given point in time and is based on the equation that Assets = Liabilities + Equity

Income Statement

This statement shows the revenue and expenses of a company over a period of time.

Statement of Equity

This statement shows how the stockholder equity changes over a period of time.

Statement of Cash Flows

This statement shows the net cash flows due to the following activities:

  1. operating expenses
  2. investments
  3. financing activities


Account Types


Liabilities and Shareholders Equity

Accounts Receivable

Money owed by customers for goods or services received.

Notes Receivable

Outstanding loans (only the principle of the loans) owed to the company.


Money incoming to a firm is considered revenue if:

  1. it is earned (there are some goods or services that are provided to the customers) AND
  2. it is realized (there is cash received or there is something received that can be easily be converted to a known amount of cash)