WAC method determines COGS and inventory using weighted average. Formula divides cost of goods available for sale by units available. Method is permitted under both GAAP and IFRS accounting
Three main financial statements are income statement, balance sheet, and cash flow statement. Income statement shows profitability under accrual accounting rules. Balance sheet displays assets, liabilities, and equity at specific point in time. Cash flow statement shows cash movements from operating, investing, and financing activities
Income statement shows company's income, expenditures and profit/loss for a period. Also known as profit and loss, statement of operation or earnings statement. Helps business owners evaluate profit generation strategies
Cash flow statement tracks cash inflows and outflows to assess company financial health. Complements balance sheet and income statement as one of three main financial statements. Helps creditors determine company's liquidity and investors assess financial stability
Shows company's assets, liabilities, and equity at specific point in time. Assets include cash, inventory, and property arranged by liquidity. Liabilities consist of debts like taxes, loans, and accounts payable. Assets must equal liabilities plus equity for balance sheet to be valid. Used by banks and investors to assess company's financial position
P&L statement summarizes company revenue, costs, and expenses over a period. Public companies must file quarterly 10-Q statements and annual 10-K reports. Statement shows operating performance and profit margins