Financial Statements & the components & interrelationships
Income Statement Revenues (amounts earned) - Expenses (costs incurred) = Net Income(Loss)
Statement of Retained Earnings Beginning R/E + Net Income - Dividends = Ending
R/E
Classified Balance Sheet and all subsections:
Current Assets (cash, ST investments, A/R, ST N/R, inventory, supplies, prepaids)
Long-term Investments (stocks & bonds)
PP&E (land, building, equipment, etc., A/D)
Intangible Assets (patent, goodwill, copyrights, trademarks/names)
Current Liabilities (ST N/P, A/P, current maturities of LT debt, tax payable, wages payable, etc)
Long-term Liabilities (LT debt)
Stockholders' Equity (CS & ending RE)
Asset = Liabilities + Stockholders' Equity (Accounting Equation)
Rules of use for Debits & Credits (normal balances for each type of account). Normal balance is the side where INCREASES in the account are recorded.
DEAD: Debits increase Expenses, Assets, Dividends (Debit normal balances) So, Credits decrease Expenses, Assets, Dividends
CLER: Credits increase Liabilities., Equity (CS & RE), Revenue (Credit normal balances) So, Debits decrease Liabilities, Equity (CS & RE), Revenue