Year 1 · Foundations · Accounting & Statements
Financial Accounting I
Learn the language behind company financial statements: the balance sheet, income statement and cash flow statement, how accrual accounting works, and how transactions flow through all three statements.
LEARNING OBJECTIVES
What you should be able to explain after this lesson
01
Explain the purpose of the balance sheet, income statement and cash flow statement.
02
Use the accounting equation and classify common assets, liabilities and equity accounts.
03
Explain accrual accounting and distinguish revenue, expenses, profit and cash.
04
Classify cash flows into operating, investing and financing activities under common reporting conventions.
05
Link net income, retained earnings, depreciation, working capital and cash across the statements.
06
Recognize why earnings quality and cash conversion matter to investors.
CONCEPT MAPHow the three statements connect
One company, three different views
CORE FACTS · SAME IN EVERY MODE
The balance sheet is a point-in-time snapshot of assets, liabilities and equity.
The income statement reports revenue and expenses over a period and arrives at profit or loss.
The cash flow statement explains changes in cash over a period by classifying cash flows into operating, investing and financing activities under the applicable reporting framework.
The three statements are linked; analyzing one in isolation can hide important information about liquidity, leverage or earnings quality.
BeginnerTeaching style changes, knowledge does not.
Imagine taking three pictures of the same business. The balance sheet answers 'What does the company own and owe today?' The income statement answers 'Did the company make a profit during the period?' The cash flow statement answers 'Where did cash actually come from and where did it go?'
COMPARISON
The three statements at a glance
| Statement | Timing | Core question |
|---|---|---|
| Balance sheet | Point in time | What does the company own and owe? |
| Income statement | Over a period | Was the period profitable? |
| Cash flow statement | Over a period | How did cash change? |
PROFESSIONAL VOCABULARYFinancial statements / états financiers / financial statements Reporting period / période de reporting / reporting period
Structured reports presenting financial position, performance and cash flows under an accounting framework.
The span of time covered by a financial report, such as a quarter or fiscal year.