The goal of the accounting cycle is to reflect the true financial condition and transactions of a company. These goals are met through the creation of the following formalized reports:
Balance Sheet: Displays the assets of a company, balanced with the sum of liabilities and owners' equity. The Balance Sheet displays information as of a specific date.
This report is sometimes known as a Statement of Financial Position.
Income Statement: Displays a summary of revenue and expenses of a company for a defined period of time. This statement does not report net income or net loss for the defined period.
This report is sometimes known as a Statement of Earnings or Statement of Operations.
Statement of Changes in Owners' Equity: Displays the capital invested in the business by the owners and the profit earned by and retained in the business.
Statement of Cash Flows: Displays the cash flows obtained from operating, investing, and financing activities.