- In this presentation, we will focus on the income statement, balance sheet and cash flow statements. These statements can be linked to the fundamental accounting equation that states assets equal liabilities plus equity. The balance sheet shows assets, liabilities, equity, and capital at a particular point in time. The income statement shows how the company has performed over a given time period. It also includes the net income and loss. The cash flow statement displays the cash outflow and inflow to the company for a given time period.
- You can trace the balance sheet back to accounting by showing how assets and liabilities are equal. You can trace the income statement back to the accounting equation. It shows how net income and loss impact the equity in the balance sheet. It is possible to trace back the accounting equation with the cash flow statement, which shows how cash flows effect the assets or liabilities of the balance sheets.
- The company that you choose will determine the accounting method used. Apple, for example, uses accrual accounting. Revenues and expenses are recorded when earned, incurred, or when cash is received. Amazon follows the exact same procedure as Apple. Tesla follows the exact same procedure as Apple.
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