Meaning of Financial Statement and its Types Video Lecture - Commerce

hi everyone thanks for watching today
today we're talking about the financial
statement basics and I'm your instructor
brandy so today when we look at the
financial statements keep in mind that
this is at a very very basic level so as
you go further and further in the course
you're going to learn more about the
financial statements and you're going to
keep adding and building on to the stuff
that you're learning today in this
tutorial the financial statements that
we look at today are also going to be
for a sole proprietor in financial
accounting we have four financial
statements we have the income statement
we have the statement of owner's equity
we have the balance sheet and we have
the cash flow statement or the statement
of cash flows in this video today we are
going to be looking at the first three
financial statements we're going to be
looking at the income statement the
statement of owner's equity and the
balance sheet whenever we're making
financial statements and financial
accounting we always start with the
income statement we make this statement
of owner's equity next and then the
balance sheet and this will become very
apparent in just a minute when I show
you how to make these statements so when
we're talking about financial same as
today let's pretend that we have a
bookkeeping company and this bookkeeping
company is called Sarah's bookkeeping
remember that the first financial
statement we create is the income
statement and at the top of every single
financial statement that we make we are
going to have three things the first
thing is going to be the company name so
in this case Sarah's bookkeeping the
next thing we're going to put is going
to be this statement name the first
statement we make is the income
statement so let's write that the next
thing that we're going to write is the
date or the period of time an income
statement is always for a period of time
so your income statement should either
have for the year ended and then the
date or for the month ended and then the
date it depends what period of time
you're looking at for this income
statement here let's pretend that we're
looking at for the year ended so we're
making an income statement for Sarah's
bookkeeping for the year ended December
31st 2014 the income statement shows two
major
categories of accounts it shows our
revenues and our expenses remember way
back from our first video the accounting
equation revenues are the amount of
money we charge per hour or per project
or when you sell something that's the
amount you charge per product the income
statement shows revenues minus expenses
to give you net income a bookkeeping
company is a service organization so
we're going to call this service revenue
and Sarah is going to have ten thousand
dollars worth of service revenue the
next major category of account on the
income statement is expenses expenses
are things that you have to pay for in
the course of doing business so your
rent your utilities your phone if you
have to pay employees salaries all sorts
of things like that or expenses so again
revenues minus expenses gives you net
income in this case sarah has service
revenue of ten thousand dollars total
expenses of three thousand dollars to
give her net income of seven thousand
dollars and I'm just going to put a
little star beside this seven thousand
dollar net income number right here
because you're going to see on the next
statement we make we are going to use
this number that's why it's very
important that we make the income
statement first so the next statement
we're going to make today is a statement
of owner's equity so first thing we're
going to put at the top is a name
Sarah's bookkeeping the next thing is a
statement name so in this case the
statement of owner's equity and the
third thing is the time period or the
date the statement of owner's equity and
the income statement there a period of
time should look exactly the same
so in our case we were looking at for
the year ended December 31st 2014 the
statement of owner's equity will be the
exact same the statement of owner's
equity always has the five same things
number one the opening balance number
two investment by owner number three net
income or loss number four withdrawals
by owner number five the closing balance
of the capital account we always make
the statement of owner's equity second
and the reason for that is because we
are going to use that closing capital
balance on our next statement the
balance sheet so pay attention to that
$30,000 because we are going to use it
on the balance sheet next the next
statement we're going to make is the
balance sheet remember the top of
financial statement there's always the
same three things the company's name the
Stayman name in this case it's the
balance sheet and the third thing is the
date notice that we don't put for the
period ended the balance sheet has
accounts that we just look at at a point
in time the balance sheet is concerned
with the accounting equation so if you
remember back to our video about the
accounting equation our accounting
equation was assets equals liabilities
plus owner's equity and that's exactly
what the balance sheet is showing that's
what we're trying to balance we're
trying to balance assets on one side and
liabilities and owner's equity on the
other side now we're going to fill in
what goes into each of the categories
remember back to our discussion about
different types of accounts that assets
have a future benefit so those are
accounts like cash office supplies and
equipment and we're going to total up
our total assets at the bottom to show
how much assets we have liabilities are
things that we owe to outsiders of the
company so accounts like accounts
payable notes payable debt to bank and
so on and since we only have one account
in liabilities we don't need to do a
total then for our owner's equity
section we're going to go back and
remember that number that we had for
closing capital balance on December 31st
and remember back that was $30,000 and
what we're going to put is the owners
name so Sarah B capital and we're going
to write the amount now we're going to
take the total of liabilities and
owner's equity and check doesn't match
total assets and if these two match
total assets equals total liabilities
and owner's equity that means your
accounting equation work and your
balance sheet works you are now allowed
to do a
be dance so now you should be able to
create a simple income statement
statement of owner's equity and a
balance sheet thanks for watching
everyone we'll see you next time