Reading the Income Statement and Balance Sheet

Overview/Description
 This course examines the cause and effect relationship between the various components of the income statement and the balance sheet. By examining these relationships, the learner will become familiar with each of the entries and how they affect each other.

Target Audience
 This course is targeted specifically for business managers, financial professionals, and other business professionals who have the need to understand financial statements.

Expected Duration
2 hours

Lesson Objectives:

The Asset Connection

  • recognize the importance of the relationships between key components in the Income Statement and assets in the Balance Sheet.
  • identify the relationship between Sales Revenue in the Income Statement and Accounts Receivable in the Balance Sheet.
  • identify the relationship between the Cost of Goods Sold expense in the Income Statement and Inventory in the Balance Sheet.
  • identify the relationship between Operating Expenses in the Income Statement and Prepaid Expenses in the Balance Sheet.
  • identify the relationship between Depreciation in the Income Statement and Fixed Assets in the Balance Sheet.
  • identify the relationship between Depreciation in the Income Statement and Accumulated Depreciation in the Balance Sheet.

    • The Liability and Shareholders' Equity Connection

  • recognize the importance of the relationships between key components in the Income Statement and liabilities and shareholder's equity in the Balance Sheet.
  • identify the relationship between Inventory in the Assets section and Accounts Payable in the Liabilities section of the Balance Sheet.
  • identify the relationship between Operating Expenses in the Income Statement and Accounts Payable in the Balance Sheet.
  • identify the relationship between Operating Expenses in the Income Statement and Accrued Liabilities in the Balance Sheet.
  • identify the relationship between Interest Expense in the Income Statement and Accrued Liabilities in the Balance Sheet.
  • identify the relationship between Income Tax Expense in the Income Statement and Income Taxes Payable in the Balance Sheet.
  • identify the relationship between Net Income in the Income Statement and Retained Earnings in the Balance Sheet.

    • Course Number: FIN0112