This chapter defines the concept of financial statement and introduces the generic structures or formats of three main financial statements: the income statement, the balance sheet, and the statement of cash flow. The income statement includes three major sections: The income or revenues, the expenses or expenditures, and the balance or summary. The balance sheet of a nonprofit organization includes three main sections: Assets, liabilities, and fund balance. The chapter establishes the differences between an income statement and balance sheet. It explains the sections of Internal Revenue Service (IRS) Form 990 related to the income statement and the balance sheet. The chapter explores the principles and procedures used to develop various financial statements and link them to the legal financial reporting requirements for a nonprofit organization. It helps the reader to gain experience with the basic terminology and tools to read nonprofit and public financial statements.