Financial Statements Paper

Financial Statements Paper

Nicole Morvan

ACC/280

June 21, 2010

Marcus Maltese

Financial Statements Paper

One of the oldest system for tracking data is known as Accounting. Accounting systems is a system that tracks all of the money that goes in and out and categorizes the ins and outs into useful groups in which it can determine where the money is coming from and what is was used for. Business is all about making money and accounting is all about money. In business someone always wants to know how much money was made or lost. Accounting is simply counting, and any basic accounting system will provide a person with simple information like how much cash was taken in or paid out today (Hart, p. xv). Accounting is an information system used to identify, record and communicate the economic events of an organization to interested users (Weygandt, p. 4). When a business has a well organized accounting system and has an orderly filing system, for important documents, it minimizes the business’ efforts when used to prepare an organization’s financial statements.

“Companies prepare four financial statements from summarized accounting data: an income statement, a retained earnings statement, a balance sheet and a statement of cash flows. The four financial statements are prepared in sequence because net income or net loss of a company for a specific period of time is computed first and is necessary to determine the ending balance in retaining earning which is obtained from the income statement which presents revenues and expenses. The ending balance in retained earning is needed in preparing the balance sheet and cash shown on the balance sheet is needed in preparing the statement of cash flows” (Weygandt, p. 21- 22). Each financial statement is a summary of the general ledger from four different perspectives.

An income statement also called the profit and loss statement, or even the statement of earnings, presents revenues and expenses...