Financial Statements

Two of the ideas you’ll keep

The Clif summary of Financial Statements pulls out 7 insights. Here are the first two.

1. The balance sheet always obeys one equation: Assets = Liabilities + Owners' Equity. Every transaction affects at least two accounts, and the two sides must always stay in balance, which is why double-entry bookkeeping is self-checking.
2. Profit and cash are not the same thing. A company can post a healthy net income on its income statement and still go bankrupt because it has run out of cash, which is exactly why the cash flow statement exists as a separate, third report.

The other 5 — and the full 11-minute summary — are in the app.

What’s inside: 9 chapters

The whole summary runs about 11 minutes, read or listened to.

1. You Don't Need to Be an Accountant
2. The Three Statements and How They Fit Together
3. The Income Statement: From Sales Down to Net Income
4. The Balance Sheet: A Snapshot That Must Balance
5. The Cash Flow Statement: Why Profit Isn't Money
6. Two Big Ideas: Accrual and the Matching Principle
7. Building AppleSeed, One Transaction at a Time
8. Reading the Numbers: Ratios and Analysis
9. Cooking the Books: GAAP, Judgment, and Fraud