Financial Statements

Financial Statements

Financial Statements

Accounting is the “financial information system that identifies, records, and communicates the financial dealings of a business to the parties involved” (Weygandt, 2008). To identify financial dealings, a company selects the financial dealings related to its business. An example of financial dealings is the sale of snack chips by PepsiCo. PepsiCo records the sales in order to provide a history of its economic activities. After PepsiCo identifies and records the events, the company communicates the composed information to the parties involved by means of bookkeeping information (p.4).

A report that is commonly used is financial statements. “Financial Statements are information that gives a suggestion of an individual’s organization’s financial status” (Wise Geek). There are four kinds of documents that are used in all businesses to give an account in the outline of a financial statement that are used from time to time to give details of the funds that come in, go out, and are in existence.

The balance sheet gives an account of the assets, liabilities and equity of a company at a particular time. Assets are established on both existing assets and set assets. The existing assets are categorized in a fast and simple way to turn into cash. Existing assets include money, financial records receivable, money-making guarantees, payments collected, and stock. Insurance that has been paid by the company is known as prepaid assets. Existing assets are property, construction, and tools. There are also assets that are untouched but are present and valuable, such as brand names and official documents. Money is an advantage for business investments and profits (Beginners’ Guide to Financial Statements, Four Financial Statements).

Liabilities and stockholders’ equity are the privileges or entitlements against assets. Liabilities are company entitlements on total assets. For example, the money that a bank...