Financial Statements Paper

Financial Statements Paper

Phillip Carter

ACC/290

November 19, 2012

Michael Olsen

Financial Statements Paper

There are four basic financial statements involved in the basic accounting process. These reports summaries the financial activity of a company over a specific time period. The first of fore is the balance sheet. The balance sheet reports assets and claims to assets at a particular point in time. Claims to assets are divided into two categories; claims of creditors and of owners. This relationship is where the name balance sheet comes from (Wiley Plus, 2012). Assets must balance with claims to assets.

For example the balance sheet lists assets such as cash, accounts receivable, equipment and buildings as well as, land. Additionally, the balance sheet outlines liabilities such as accounts payable and notes payable. Moreover, the balance sheet brings to bear the owners’ equity. Consequently, liabilities and owners’ equity should balance with a company’s assets.

The balance sheet is a report on the company’s resources. This information can be useful to internal customers in management rolls to determine how much cash is on hand. Additionally this information is useful to external stakeholders such as creditors and investors who can use the data to determine if the company will be able to repay their debt (Wiley Plus, 2012).

The second financial statement we will discuss is the Income Statement. This statement lists the company’s revenues against its expenses. This reflects the success of failure of the operation over a specific time. If the financial report reveals renew exceeds expenses then net profits are realized. However, if expenses exceed review the result is a net loss. Moreover, internal stake holders can use this information to evaluate the success or performance of the operation within a set block of time.

Additionally, external stakeholders can use this information to help forecast future net income or loss. Banks and creditors...