1.3 Financial Statements
These are reports gathered from the daily transactions and prepared as a means of communicating significant accounting information to users. Generally, there are four financial statements prepared in manual accounting. The Statement of Owner’s Equity is called Statement of Retained Earnings for Sage 50 users. Sage 50 also offers these four financial statements: (Plus Sage 50 presents a Statement of Changes in Financial Position - an added feature to the Statement of Cash Flow. It shows the analysis of the components of changes that have transpired during the period.)
Income Statement – is a financial statement that shows the net operating results of the business. It summarizes the revenue earned and the expenses incurred over a specific period of time. This is also called the Profit and Loss Statement.
Statement of Retained Earnings - is a financial statement that shows the changes in the capital balances of the owner(s) for a specific period of time. It shows the beginning capital balance, increased, or decreased by any adjustments, increased by the net income and owner’s contributions and decreased by the net loss and the owner’s withdrawal for the period.
Balance Sheet – is a financial statement that shows the financial position of the business as of a given date. Sage 50 incorporates the Statement of Owner’s Equity in the Balance Sheet, which would have been a separate financial statement prepared in manual accounting. Sage 50 presents the Equity section of the Balance Sheet in detail to include the Owner’s Investment, Owner’s Draw, Retained Earnings, and the Net Income or Net Loss for the period.
Statement of Cash Flow – is a financial statement that shows the changes in the cash position of the business. It presents the sources of cash and the application or uses of cash, which allows the users of this financial statement to analyze the causes of the increase and decrease in cash for a specific period of time.