The Financial Statements: A Framework

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Do curso por University of Virginia

Financial Accounting Fundamentals

272 ratings

University of Virginia

Financial Accounting Fundamentals

272 ratings

This course will teach you the tools you'll need to understand the fundamentals of financial accounting. Concise videos, the financial records of a small business, and "your turn" activities guide you through the three most commonly used financial statements: the Balance Sheet, the Income Statement, and the Statement of Cash Flows. Beyond recording transactions, you'll learn how to prepare these financial statements, and read and analyze them to draw basic conclusions about a company's financial health. By the end of this course, you will be able to: - Use journal entries to record transactions; - Prepare and use t-accounts to summarize transactions recorded during an accounting period; - Describe the three most commonly used financial statements and how they fit together; - Prepare these financial statements based on transactions recorded during an accounting period; and - Draw basic conclusions about a company's financial health.

Na lição

Introduction to Financial Accounting, the Financial Statements, and the Balance Sheet

During this first week, we’ll learn about the context for financial accounting, including the informational role it plays for both internal and external audiences. We’ll explain accounting standards, which ensure financial information is conveyed clearly and effectively. Finally, we’ll describe the three primary financial statements as part of a recurring accounting process, called the accounting cycle, and then dive into one of those statements: the Balance Sheet (BS).

The Financial Statements1:11

The Financial Statements: A Framework3:01

The Accounting Cycle2:06

Conheça os instrutores

Luann J. Lynch
Almand R. Coleman Professor of Business Administration
Darden School of Business

Let's put these three financial statements into a framework

that we can refer to throughout the course.

So let's envision that we have the beginning of a period, it might be a year,

it might be a quarter, but the beginning of a period, and the end of a period.

So we'll call this the accounting period, okay?

At the beginning of the period, we could have a balance sheet

that would show us exactly what the company looked like,

exactly what the financial position looked like at that specific point in time.

So it would be like I have a camera here, because it would be like just taking

a snapshot, at that very nanosecond of what happened in time for that company.

The balance sheet is cumulative, so it will have accumulated the effect of all

transactions of everything that happened, In the company, since its inception.

So all of that will be accumulated here on the balance sheet.

I could take a snapshot of the financial position of a company at the end of

the period, or at the end of the year.

Again, specific point in time, this balance sheet will

accumulate the effect of all the transactions that have

happened since, The company's inception.

Now because one of these is at the beginning of the period, and

one of these is at the end of the period,

we would expect them to look different, because time has passed here.

So clearly, the balances in some of these accounts, or the financial position of

the company, will have changed over this particular period of time.

Wouldn't it be terrific, if we had something that would tell us

how this financial position had changed from the beginning of the period, or

the end of the period, or would help us understand that change?

Well, luckily we do.

We have two statements that help us understand how we get from the beginning

of the period to the end of the period.

The first one is the Income Statement.

We'll talk about the Income Statement in a moment.

The second statement, is the Statement of Cash Flow, and

I like to call these the video production of the accounting system,

because they help us understand what happens during a period of time.

So we'll spend some time talking about the Income Statement, and

how it helps us understand how we get from this picture to this picture.

And then we will spend some time talking about the Statement of Cash Flow in this

same spirit.

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