The Layman’s Guide to Understanding Financial Statements How to Read, Analyze, Create & Understand Balance Sheets, Income Statements, Cash Flow & More
By
Simon J. Lawrence
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Cover design Lisa Cunningham First Edition
Contents Introduction Chapter 1: Accounting and Bookkeeping Principles Defining Terminology What are Accounting and Bookkeeping Duties of a Bookkeeper vs. an Accountant Key Accounting and Bookkeeping Principles Economic Entity Assumption Monetary Unit Assumption Specific Time Period Assumption Cost Principle Full Disclosure Principle Going Concern Principle Matching Principle Revenue Recognition Principle Materiality Principle Conservatism Principle Chapter 2: Introduction to Financial Statements What are Financial Statements? Using Financial Statement Information Balance Sheets Income Statements Classifying Revenue and Expenses The Cash Flow Statement Investing Activities Financing Activities Statement of Owner's Equity Why Financial Statements are Important Who Needs to See Financial Statements?
Chapter 3: Preparation and Interpreting Financial Statements Preparing and Interpreting the Trial Balance Benefits of the Trial Balance Shortcomings of the Trial Balance Preparing and Interpreting the Income Statement Step 1: Calculate the Gross Profit Step 2: Calculate Earnings Before Interest and Taxes(EBIT) Step 3: Calculate the Earnings Before Tax (EBT) Step 4: Calculate the Net Income Preparing and Interpreting the Balance Sheet Step1: Determine the Reporting Date and Period Step 2: Identify Your Assets Step 3. Identify Your Liabilities Step 4: Calculate Shareholders’ Equity Step 5: Compare the sum of Assets with that of Liabilities and Owner's Equity Preparing and Interpreting the Statement of Cash Flows Step 1: Gather Cash Flows from Operations Step 2: Calculate Cash Flow from Investing Activities Step 3: Calculate Cash Flow from Financing Activities Preparing and Interpreting the Statement of Owner's Equity Chapter 4: What You Can Learn From Financial Statements Learning from the Balance Sheet Learning from the Income Statement Learning from the Statement of Owner's Equity Learning from the Statement of Cash Flow Chapter 5: Precautions and Mistakes to Avoid Mistakes Made by Amateur Accountants Accounting Basics You Should Never Forget How to Detect Accounting Problems from Financial Statements
FAQs about Financial Statements Conclusion
Introduction
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