Accountants are responsible for preparing three main types of financial statements for a company. The income statement reports the company’s profitable assets and funds profit or loss during a certain period. Financial statements report a company’s financial position at a specific time, often on the last day of the period. and financial statements report the amount of money the company makes with that money.
Everyone knows that profit is a good thing. That’s where our economy is built. It doesn’t seem like a big problem. Make more money than you spend selling or making products. But of course, nothing is really that simple, right? The income statement, or net income statement, first identifies the activities and time periods that are summarized in the report.
Read the income statement from top to bottom. Each step of the income statement shows a reduction in costs. The income statement also reports changes in assets and liabilities, so if there is an increase in revenue, it is because there has been an increase in the company’s assets or a decrease in liabilities. If there has been an increase in the expense line, it is because there has been a decrease in assets or an increase in liabilities.
Equity is also referred to as company equity. They are not really interchangeable. Shareholders’ equity discloses total assets minus liabilities. Equity refers to who owns the assets after the obligations have been satisfied.
These changes in assets and liabilities are important to business owners and executives because it is their responsibility to manage and control those changes. Making a profit in a company involves several variables, not only increasing the amount of money flowing through the company, but also managing other assets.