The following video summarizes the four financial statements required by GAAP. The net income from the income statement will be used in the which of the following financial statements typically is prepared last? Statement of Equity.

Statement of  Retained Earnings (or Owner’s Equity)

The balance sheet,  lists Certified Bookkeeper the company’s assets, liabilities, and equity (including dollar amounts) as of a specific moment in time. That specific moment is the close of business on the date of the balance sheet. Notice how the heading of the balance sheet differs from the headings on the income statement and statement of retained earnings. A balance sheet is like a photograph; it captures the financial position of a company at a particular point in time.

• Management is interested in the cash inflows to the company and the cash outflows from the company because these determine the company’s cash it has available to pay its bills when due.
• The statement of cash flows shows the cash inflows and outflows for a company over a period of time.
• The net income from the income statement will be used in the Statement of Equity.
• The statement of retained earnings – also called statement of owners equity shows the change in retained earnings between the beginning and end of a period (e.g. a month or a year).
• We will examine the statement of cash flows in more detail later but for now understand it is a required financial statement and is prepared last.
• The financial statement that reflects a company’s profitability is the income statement.
• The balance sheet,  lists the company’s assets, liabilities, and equity (including dollar amounts) as of a specific moment in time.

Income Statement

Thanks to GAAP, there are four basic financial statements everyone must prepare . The financial statement that reflects a company’s profitability is the income statement. The statement of retained earnings – also trial balance called statement of owners equity shows the change in retained earnings between the beginning and end of a period (e.g. a month or a year). The balance sheet reflects a company’s solvency and financial position. The statement of cash flows shows the cash inflows and outflows for a company over a period of time.

Statement of Cash Flows

The statement of cash flows shows the cash inflows and cash outflows from operating, investing, and financing activities. Operating activities generally include the cash effects of transactions and other events that enter into the determination of net income. Management is interested in the cash inflows to the company and the cash outflows from the company because these determine the company’s cash it has available to pay its bills when due. We will examine the statement of cash flows in more detail later but for now understand it is a required financial statement and is prepared last. The statement of cash flows uses information from all previous financial statements.