What Are Financial Statement Items in Accounting?

Financial statements are the reports management use to gauge its profitability and operational effectiveness. Additionally, financial statements are released to outside stakeholders as a disclosure of the company's financial health and strength.

Facts

Companies prepare three main financial statements: the income statement (I/S), balance sheet (B/S) and statement of cash flow. Each statement includes specific items of the company's financial information.

Features

The I/S includes revenues, cost of goods sold (COGS) and expenses. The B/S includes all company-owned assets, liabilities and retained earnings. The cash flow statement shows the amount of cash flow earned through operating, investing and financing activities.

Functions

Revenues include sales to consumers and sales discounts; COGS is the product cost of each item sold; expenses include labor and utilities used to operate the company facilities. Assets include equipment, property and buildings; liabilities include money owed to vendors and bank loans. Retained earnings consists of all profit kept in the business to grow company operations.

Significance

Income statement items indicate how well the company is earning profits. Balance sheet items list all assets needed for the company to generate sales. Liabilities indicate if the company uses debt or equity to finance operations. Cash flow items indicate if a company has enough cash to pay its monthly bills.

Time Frame

Income statement items and cash flow items are reported in a monthly time period. Balance sheet items are recorded when they occur; long-term assets must be revalued according to generally accepted accounting principles (GAAP) to reflect the current market value of the asset.

References

• Financial Accounting Standards Board
• Investopedia: Financial Statements
• McGraw Hill: Sample Financial Statement Workflows