The last line of your income statement, called the bottom line, shows you net income or loss. Your cash flow statement, or statement of cash flows, is all of your business’s incoming and outgoing cash. Basically, your cash flow statement shows you how much cash flows in and out of your business. Your statement of financial statements are typically prepared in the following order cash flows only records the actual cash your company has. The balance sheet provides an overview of a company’s assets, liabilities, and shareholders’ equity as a snapshot in time. The date at the top of the balance sheet tells you when the snapshot was taken, which is generally the end of the reporting period.
The balance sheet reflects a company’s solvency and financial position. The statement of cash flows shows the cash inflows and outflows for a company over a period of time. The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. These three statements together show the assets and liabilities of a business, its revenues and costs, as well as its cash flows from operating, investing, and financing activities.
Assets
However, to accurately receive your financial information, you must process your financial statements in a specific order. The financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows. After you generate your income statement and statement of retained earnings, it’s time to create your business balance sheet. Again, your balance sheet lists all of your assets, liabilities, and equity.
Use the information from your income statement and retained earnings statement to help create your balance sheet. Then, list out any expenses your company had during the period and subtract the expenses from your revenue. The bottom of your income statement will tell you whether you have a net income or loss for the period. Your assets are items of value and things that your business owns. Current assets are items of value that can convert into cash within one year (e.g., checking account). Noncurrent assets are items of value that take more than one year to convert into cash.
Income Statement
Below is a portion of ExxonMobil Corporation’s (XOM) balance sheet for fiscal year 2021, reported as of Dec. 31, 2021. The net income from the income statement will be used in the Statement of Equity. Expenses could be various operating costs, like inventory, rent, or utilities. Use the formula above to help calculate your retained earnings balance at the end of each period. Get up and running with free payroll setup, and enjoy free expert support.
- Create your balance sheet and include any current and long-term assets, current and noncurrent liabilities, and the difference between your assets and liabilities (aka equity).
- For-profit primary financial statements include the balance sheet, income statement, statement of cash flow, and statement of changes in equity.
- Instead of reporting just $23.5 billion of net income, ExxonMobil reports nearly $26 billion of total income when considering other comprehensive income.
- The CFS also provides insight as to whether a company is on a solid financial footing.
We can see the three areas of the cash flow statement and their results. Or, you can add your retained earnings statement to your balance sheet. Read on to learn the order of financial statements and which financial statement is prepared first. Learn the importance of the order of financial statements in small business accounting. For example, some investors might want stock repurchases while other investors might prefer to see that money invested in long-term assets. A company’s debt level might be fine for one investor while another might have concerns about the level of debt for the company.