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There are four basic financial statements: balance sheet, income statement, cash flow statement and statement of shareholders equity. Do you know the difference?


1. Balance sheet – describes the financial condition of the organization at one given point in time such as December 31. The balance sheet is comprised of assets, liabilities and shareholders equity.


2. Income statement - describes the organization's results of operations over a specific period of time. It measures revenues earned and actual expenses incurred to arrive at a net income or loss figure.


3. Cash flow statement – summarizes all changes in cash and financial position that have taken place during the period. The changes are broken down between operating, financing and investing activities.


4. Statement of shareholders equity – explains the changes in earnings retained by the organization and capital contributed by the stockholders.


Financial information is one of the most critical management tools to evaluate business success and profitability. Please contact your Rea advisor to review and discuss your current financial statement.


-By Thomas R. Jeffries, CPA (Millersburg office)


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