How do you look at financial statements (students point of view)?

Introduction to Financial Statement

This how I see Financial Statements Before
             My first and second week of accounting class, I was struggling to understand the concept of a financial statement, few students can understand Accounting and others are confused including myself. I have to think hard and reason out if the given data is an asset, liability or stockholders equity. I also struggle how to generate a correct balance sheet, income statement and retained earning statement. It is a guessing game and most of the time I put data in a wrong category of financial statement. In figure 1, this is how I envision financial statements before: Income statements, Retained Earning Statements and Balance Sheet are separate entities. This is where I have a hard time trying to analyze their relationships with each other.

            You may be wondering why I used T-shirt images. Well, I love T-shirts and I like to share a story about those T-shirts. Let us assume that the blue Balance Sheet-shirt is in San Diego, Red Income Statement-Shirt is in San Francisco, and Green Retained Earning Statement Shirt is in New York. If we want to analyze and collect those three shirts and put them in one location, it requires tons of energy and hard work to collect them all. We have to travel long distance to do it.  This is what I was doing during the first two week of accounting class. I was getting frustrated and confused.

        

               Suddenly, as I was intently listening to my instructor teach, she said something that sparks a "AHA" moment that changed the way I look at Financial Statements. I had applied this idea to my assignments. It helps me complete my work with confidence and I was doing it the correct way. I shared my AHA moments to the members of my accounting group, and they also had sparks in their eyes that they financial statements the way I see it.

This is how I see Financial Statement Now
        

            The AHA moment that I was discussing is shown in figure 2. I have to look at Balance Sheet, Income Statements, and Retained Earning Statement in one piece as represented by the long sleeve gray shirt.  Let us assume the Gray-Shirt is located in San Diego, San Francisco, or New York. I do not have to travel long distance to analyzed Balance Sheet, Income Statements, and Retained Earning Statement because they are already in place. My only action is to break it down in three pieces and start analyzing.

But How???  Hmmmm

           The Answers is in Figure 3. This is the application of the AHA moment. This is the information that I had shown my group-mates that had created a spark of AHA moments in their eyes.

 How does it work?   

            Figure 3 is a cheat sheet Financial Statement is represented by gray long sleeves shirt that is shown in figure 1 and 2. The Red Shirt is the Income Statement, Green Shirt is the Retained Earning Statements, and Blue shirt is the Balance Sheet columns.

The Table is divided into 3 blocks

1. Red block      =    Income Statement (Red Shirt)
2. Green block   =    Retained Earning Statement (Green Shirt)
3. Blue Block     =   Balance Sheet (Blue Shirt)

           It is so simple and easy to say that an Asset is an Asset, Liability is a Liability, and Stockholders equity is Stockholders Equity. In reality, in a student point of view, and this where some students struggle (including myself) and ask the question "where should I put the data? " 

           This is how I did it, how did I get the Data that you see from the assets column to the dividends column?

1. I ask my instructor (Example: Is Accounts payable an asset or Liability?)
2. I look at Financial Statements on the book that we are using (Example: Whatever I see data on Assets in a financial statement I write them down on the Asset column)
3. Ask for a second opinion from the instructor 
4. I watch YouTube 

           The financial statement table (FIST Table) is always in front of me every time I study my accounting. This helped me understand Accounting better because I see it as one unit and I can see their relations with each other.  Hopefully, I have given you additional insights.

           If you have any questions about the financial statement  table and if you need  FREE PDF copy of the table (Blank and filled), feel free to email me at  Irwin77@email.phoenix.edu
or you can create your own.

Figure 3. Financial Statement Table (FIST Table)

See Next Accounting Precepts Blog: 

Financial Statement Table (FIST Table) Explanation

Watch Financial Statement Video Trailer:

Financial Statement Formula Image?

Financial Statement image

Formula:

                        Assets (A)    =     Liabilities (L)   +   Stockholders Equity (SE)

  Stockholders Equity (SE)    =    Common Stocks (CS)  +   Retained Earnings (RE)

      Retained Earning (RE)   =     Revenues (R)   -   Expenses (E)   -    Dividends (D)

The '"Concept Image"

Financial Statement Image with Formula

 Watch the Video:

 What do you think?