• Assets = Liabilities + Owner Equity
• Asset is the money you spend in order to operate the business
• Balance sheet represents the financial position of a company at a specific moment in time
• The balance sheet must always keep its equilibrium
• Income increases Owner equity / Drawing decreases Owner equity
• Income statement shows the way income has been earned during that period
• Basic form of income statement can be defined as:
o Sales−Cost. of Goods Sold=Gross Income.
o Gross Income−Expenses=Net Income.
• The income statement explains the increase of owner equity represented by net income.
• An expense is not necessarily a cash outflow (depreciation)
• The cash flow statement “is an elaboration of the Balance-Sheet
• change in beginning and ending Cash »
• All the financial statements are articulated
