Question
Three financial statements
Answers
GPT-4o mini
The three primary financial statements used in accounting to provide an overview of a company's financial position and performance are:
1. **Income Statement** (also known as Profit and Loss Statement or Statement of Earnings):
- **Purpose**: To summarize the revenues, expenses, and profits or losses over a specific period (e.g., quarterly or annually).
- **Key Components**:
- Revenues (Sales)
- Cost of Goods Sold (COGS)
- Gross Profit
- Operating Expenses (e.g., Selling, General and Administrative Expenses)
- Operating Income
- Other Income/Expenses (e.g., interest, taxes)
- Net Income (or Net Loss)
2. **Balance Sheet** (also known as Statement of Financial Position):
- **Purpose**: To provide a snapshot of a company's assets, liabilities, and equity at a specific point in time.
- **Key Components**:
- **Assets**: Resources owned by the company (e.g., cash, inventory, property, equipment).
- Current Assets (assets expected to be converted to cash or used up within one year)
- Non-Current Assets (long-term investments, property, and intangible assets)
- **Liabilities**: Obligations or debts owed to external parties (e.g., loans, accounts payable).
- Current Liabilities (due within one year)
- Non-Current Liabilities (due beyond one year)
- **Equity**: The residual interest in the assets after deducting liabilities (e.g., common stock, retained earnings).
3. **Cash Flow Statement**:
- **Purpose**: To report the cash generated and used during a specific period, highlighting the company's liquidity and cash management.
- **Key Components**:
- Cash Flows from Operating Activities: Cash received from customers minus cash paid to suppliers and employees.
- Cash Flows from Investing Activities: Cash spent on or received from the purchase and sale of long-term assets (e.g., property, equipment).
- Cash Flows from Financing Activities: Cash received from or paid to investors and creditors (e.g., issuance of stock, taking on loans).
Together, these three financial statements provide a comprehensive overview of a company's financial health, performance, and cash management, which is essential for stakeholders like investors, creditors, and management.
1. **Income Statement** (also known as Profit and Loss Statement or Statement of Earnings):
- **Purpose**: To summarize the revenues, expenses, and profits or losses over a specific period (e.g., quarterly or annually).
- **Key Components**:
- Revenues (Sales)
- Cost of Goods Sold (COGS)
- Gross Profit
- Operating Expenses (e.g., Selling, General and Administrative Expenses)
- Operating Income
- Other Income/Expenses (e.g., interest, taxes)
- Net Income (or Net Loss)
2. **Balance Sheet** (also known as Statement of Financial Position):
- **Purpose**: To provide a snapshot of a company's assets, liabilities, and equity at a specific point in time.
- **Key Components**:
- **Assets**: Resources owned by the company (e.g., cash, inventory, property, equipment).
- Current Assets (assets expected to be converted to cash or used up within one year)
- Non-Current Assets (long-term investments, property, and intangible assets)
- **Liabilities**: Obligations or debts owed to external parties (e.g., loans, accounts payable).
- Current Liabilities (due within one year)
- Non-Current Liabilities (due beyond one year)
- **Equity**: The residual interest in the assets after deducting liabilities (e.g., common stock, retained earnings).
3. **Cash Flow Statement**:
- **Purpose**: To report the cash generated and used during a specific period, highlighting the company's liquidity and cash management.
- **Key Components**:
- Cash Flows from Operating Activities: Cash received from customers minus cash paid to suppliers and employees.
- Cash Flows from Investing Activities: Cash spent on or received from the purchase and sale of long-term assets (e.g., property, equipment).
- Cash Flows from Financing Activities: Cash received from or paid to investors and creditors (e.g., issuance of stock, taking on loans).
Together, these three financial statements provide a comprehensive overview of a company's financial health, performance, and cash management, which is essential for stakeholders like investors, creditors, and management.