Overview: Introduction to the General-Purpose Financial Statements (Part A - Equations, Relationships & Articulation)

Introduction to the General-Purpose Financial Statements (Part A - Equations, Relationships & Articulation)

In this Module, I hope to help you become familiar with the four General-Purpose Financial Statements.  Some of this module will be a review for you so hopefully this module will help you really nail these concepts down.

We will start off by reviewing (or introducing) the standard equations for the general-purpose financial statements, particularly, the Balance Sheet, the Statement of Shareholder Equity (including the Statement of Retained Earnings), the Income Statement and the Statement of Cash Flows.

We will then move on to discuss how these financial statements relate to (i.e. "articulate") influence the balances in each other.  As a reminder of the concept of articulation, I have included an articulating skeleton below. 

As you probably know, the bones in our skeletons, and the related tendons, "articulate" to move the other bones which allow us to walk, grasp things, and simply move around.  Financial statements also have a system of articulation as can be seen in the diagram below:

With that in mind, we will work through some simple transactions for a new start-up company and see how such transactions influence the financial statements.

Finally, we will spend a little time understanding management's, the internal auditors', and the external auditors' roles in preparing, auditing and submitting the general-purpose financial statements of publicly traded companies.

I believe that individuals who fully understand the general-purpose financial statements, and how they articulate with each other, will have an increased ability to understand them and use that understanding to make better lending and investing decisions.

To Complete This Module

To complete this module, you will need to study all of the content pages and successfully complete the related topic and module quizzes. To successfully complete quizzes you need to achieve a score of at least 4 out of 5 for topical quizzes and achieve a score of at least 8 out of 10 for the module quiz. You may take and re-take quizzes as many times as necessary to master the material and get your passing score.

To track which content pages you have viewed and which quizzes you have successfully completed, click the "Modules" link on the course menu on the left.  A green check mark will appear to the left of each “Study” page that you have viewed and by each “Quiz” that you have successfully completed in the module. 

I anticipate that this module will take about 2 hours to complete.