Standardizing Financial Statements

Income Statements

• Income statement displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write offs (e.g., depreciation and amortization of various assets) and taxes.
• The income statement can be prepared in one of two methods: The Single Step income statement and Multi-Step income statement.
• The income statement includes revenue, expenses, COGS, SG&A, depreciation, other revenues and expenses, finance costs, income tax expense, and net income.

Balance Sheets

• Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.
• The main categories of assets are usually listed first (in order of liquidity) and are followed by the liabilities.
• The difference between the assets and the liabilities is known as "equity".
• Balance sheets can either be in the report form or the account form.
• A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.
• Guidelines for balance sheets of public business entities are given by the International Accounting Standards Board and numerous country-specific organizations/companies.

Key terms

• asset Something or someone of any value; any portion of one's property or effects so considered.
• balance sheet A summary of a person's or organization's assets, liabilities and equity as of a specific date.
• equity Ownership, especially in terms of net monetary value, of a business.
• intangible asset Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched, or physically measured, and are created through time and effort, and are identifiable as a separate asset.

Source: Boundless
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