Financial Statements

The first PhxKlips we viewed was “The Accounting Equation”. This taught us how to remember the accounting equation by remembering “ALOE”. I took an accounting class online for the community college in Baltimore, and was not taught “ALOE”. I liked that it gave us a way to remember the equation. “ALOE” is something you can always remember and does help to remember the equation. The equation “ALOE” means Assets= Liabilities + Owner’s Equity. This is the equation used for all accounting tasks and procedures. “Debits and Credits” was the second PhxKlips viewed. We learned that debits are on the left side of the T-account, and credits are on the right side. This is the same as expenses on the left, and revenues on the right. We also learned that a normal balance does not have to be on the left. It can be on either side. The third PhxKlips viewed was “Financial Statements.” There are four financial statements to work with; Balance Sheets, Income Statements, Retained Earnings Statements, and Statement of Cash Flows. Balance sheets let you have a quick review of what assets, liabilities, and equity were distributed within the accounting period. Income statements show the business whether they made a profit or not. Retained earnings statement shows what the company decides to retain for them, after everything else is paid. The statement of cash flows shows what the cash receipts and cash payments were in the accounting period, and shows how much cash is available. The last PhxKlips viewed was “Income Statements.” We learned that there are two different types of income statements. You have a “Single Step Income Statement”, and a “Multi Step Income Statement.” The single step income statement uses revenues, expenses, and net income. It has the single step of subtracting expenses from revenues, and getting the net income. The multi step income statement provides more information on operating and non-operating