Financial Reporting seems more complex than I think it should. And you probably, maybe you've never looked at financial statements before. But you're probably familiar with the basic concepts involved. And you can think of it pretty simply, it's really not all that complex. If you have a bank account, checking account, demand deposit account, even a credit card account, you'll understand the basics behind the principles behind this. If you were to go into your checking account, your your credit card account, to look at it periodically, which you should, I'd recommend that highly you what is the first thing that you're interested in?

Typically, the first thing that shown to you at the top of every one of those accounts is the balance. The balance is the accumulation of all the transactions over time, but the most important thing is knowing what the position is today. All financial reporting begins with a balance and in financial systems, it begins with the balance sheet. The balance sheet shows us how things look today, what our accumulated balances in cash and investments and credit cards, and our outstanding mortgage balance are the value of our home today, our cars, whatever it is, all of those things get accumulated onto the balance sheet. The balance sheet has a few parts to it in financial statements. The typical balance sheet at the top is assets.

Assets are things you own things that you control, there are good things to have. The next section of the balance sheet is called liabilities. Liabilities are things that you owe things that you will have to pay to someone else or someone else has claim upon you in some way. The difference between assets and liabilities. Hopefully if it's positive, it means you have more assets than you have liabilities that means you're solid In some way, if you have more liabilities than you have assets, then you don't have what's called equity. You're in a better position.

But if you have more assets than liabilities, then you have what's called equity. That's the difference between liabilities and assets. Now the balance sheet is good because you want to know where you're at today, but it's not a very good predictor of where you're going and what's next. That is required from the income statement.