Financial Statements -tax consultant | Pretoria | South Africa
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Introduction to Financial Statements
In this topic you will learn about the five financial statements that a U.S. corporation should include when it distributes its annual financial statements to anyone outside of the corporation. The five financial statements are:
- Income statement
- Statement of comprehensive income
- Balance sheet
- Statement of stockholders' equity
- Statement of cash flows
The annual financial statements should also include notes to the financial statements. The notes (which are to be referenced on each financial statement) disclose important information regarding the amounts appearing or not appearing on the financial statements.
The financial statements that are distributed by a U.S. corporation must comply with the common rules known as generally accepted accounting principles or GAAP or US GAAP. If the corporation's stock is traded on a stock exchange, the corporation is also required to comply with the reporting requirements of the Securities and Exchange Commission (SEC), an agency of the U.S. government.
It is important to understand that most of the amounts contained in the financial statements resulted from recording past transactions. Hence the amounts may not be relevant for future decisions and will not indicate the corporation's fair market value.