Activity 2 The Four Financial Statements\ \ Purpose:\ Identify the four financial statements.\ Understand the basic information provided by each financial statement.\ Accounting is the system of recording, classifying, and reporting financial information. Four financial statements report this information: balance sheet, income statement, statement of stockholders equity, and the statement of cash flows.\ \ BALANCE SHEET\ Assets Liabilities\ Stockholders equity\ The Balance Sheet (BS) provides a snapshot of a companys financial position as of a certain date. It reports assets, items of value such as inventory and equipment, and whether the assets are financed with liabilities (debt) or stockholders equity (equity).\ \ INCOME STATEMENT\ Revenues\ (Expenses)\ Net income\ The Income Statement (IS) reports the companys profitability during an accounting period. It reports revenues, amounts received from customers for products sold or services provided, and expenses, the costs incurred to produce revenues. The difference is net income.\ \ STATEMENT OF STOCKHOLDERS EQUITY\ Retained earnings, beginning + Net income\ (Dividends)\ Retained earnings, ending Contributed capital, beginning + Issuance of shares\ (Repurchase to retire shares)\ Contributed capital, ending\ The Statement of Stockholders Equity (SE) reports if the earnings (net income) of this accounting period are distributed as dividends or retained in the business as retained earnings. It also reports amounts paid-in (contributed) by stockholders to purchase common stock and preferred stock.\ \ STATEMENT OF CASH FLOWS\ Cash inflows\ (Cash outflows)\ Change in the cash account\ The Statement of Cash Flows (CF) reports cash inflows and cash outflows during an accounting period.\ \ Q1 Which financial statement reports:\ whether assets are primarily financed with debt or equity? (BS / IS / SE / CF)\ whether the company was profitable or not? (BS / IS / SE / CF)\ cash received from customers during the accounting period? (BS / IS / SE / CF)\ dividends declared by the board of directors for shareholders? (BS / IS / SE / CF)\ retained earnings at the beginning of the accounting period? (BS / IS / SE / CF)\ the expenses of a corporation? (BS / IS / SE / CF)\ the assets of a corporation? (BS / IS / SE / CF)