Rview of Financial Statements Essay Example | Topics and Well Written Essays - 250 words

Rview of Financial Statements - Essay ExampleAccountants keep track of the financial activity of a company by go ining journal entries. The eight steps of the accounting cycle are record transactions in journal, post transactions to ledger, prepare adjusting entries, prepare heavyset of account balances, prepare income account and revenue and expense accounts, close revenue and expense accounts to retained earnings, prepare post closing summary of account balances, prepare balance sheet and statement of cash flow. Once the accountants of Lowes and radical entrepot complete the accounting cycle the financial statements are ready. The income statement is a statement that states the profitability of a company. At the top of the statement the revenues of the company are expressed. The costs of goods sold are subtracted to arrive at the gross profits. Then the operating expenses and taxes are subtracted to obtain the net income of the firm. The revenues and net income of Lowes in pe cuniary year 2009 were $47.22 billion and $1.783 billion (Annual Report Lowes, 2009). In 2009 Home Depots performance was better. Home Depot in 2009 had revenues of $66.18 billion and net income of $2.66 billion (Annual Report Home Depot, 2009). The balance sheet is a financial statement that reflects the financial position of a company at a specific exhibit in time. The basic elements of the balance sheet are the assets, liabilities, and stockholders equity.