Financial Statements

Study Notes

Financial Statements

Definition: Financial statements are formal records that provide information about a company's financial position, performance, and cash flows.
Types of Financial Statements:
1. Balance Sheet: presents the company's financial position at a specific point in time, including assets, liabilities, and equity.
2. Income Statement: reports the company's revenues and expenses over a specific period of time, usually a month, quarter, or year.
3. Cash Flow Statement: shows the company's inflows and outflows of cash over a specific period of time.
4. Statement of Stockholders' Equity: reports the changes in a company's equity over a specific period of time.
Financial Statement Analysis:
- Ratio Analysis: calculates ratios to evaluate a company's performance, liquidity, and solvency.
- Vertical Analysis: analyzes the proportion of each item on the financial statement to a base item.
- Horizontal Analysis: compares the financial statements over time to identify trends.

Cost Accounting

Definition: Cost accounting is a branch of accounting that focuses on calculating and managing the costs of a business.
Cost Classifications:
1. Direct Costs: directly related to the production of goods or services, such as labor and materials.
2. Indirect Costs: not directly related to the production of goods or services, such as overhead costs.
3. Fixed Costs: remain the same even if the production level changes, such as rent and salaries.
4. Variable Costs: change with the production level, such as raw materials and labor costs.
Cost Accounting Systems:
1. Job Costing: tracks the costs of each job or project.
2. Process Costing: tracks the costs of each process or stage of production.
3. Activity-Based Costing: assigns costs to activities and then to products or services.
Cost Accounting Techniques:
1. Cost-Benefit Analysis: evaluates the costs and benefits of a decision or project.
2. Break-Even Analysis: calculates the point at which the company's revenue equals its total fixed and variable costs.
3. Standard Costing: uses predetermined costs to evaluate the efficiency of operations.

Financial Statements

Financial statements provide information about a company's financial position, performance, and cash flows.
There are four main types of financial statements:
- Balance Sheet: presents a company's financial position at a specific point in time, including assets, liabilities, and equity.
- Income Statement: reports a company's revenues and expenses over a specific period of time.
- Cash Flow Statement: shows a company's inflows and outflows of cash over a specific period of time.
- Statement of Stockholders' Equity: reports changes in a company's equity over a specific period of time.

Financial Statement Analysis

Ratio Analysis: calculates ratios to evaluate a company's performance, liquidity, and solvency.
Vertical Analysis: analyzes the proportion of each item on the financial statement to a base item.
Horizontal Analysis: compares financial statements over time to identify trends.

Cost Accounting

Cost accounting focuses on calculating and managing the costs of a business.
Cost classifications include:
- Direct Costs: directly related to the production of goods or services, such as labor and materials.
- Indirect Costs: not directly related to the production of goods or services, such as overhead costs.
- Fixed Costs: remain the same even if the production level changes, such as rent and salaries.
- Variable Costs: change with the production level, such as raw materials and labor costs.

Cost Accounting Systems

Job Costing: tracks the costs of each job or project.
Process Costing: tracks the costs of each process or stage of production.
Activity-Based Costing: assigns costs to activities and then to products or services.

Cost Accounting Techniques

Cost-Benefit Analysis: evaluates the costs and benefits of a decision or project.
Break-Even Analysis: calculates the point at which a company's revenue equals its total fixed and variable costs.
Standard Costing: uses predetermined costs to evaluate the efficiency of operations.

Description

Financial statements provide information about a company's financial position, performance, and cash flows. Learn about the types of financial statements, including balance sheets, income statements, and cash flow statements.