Financial Statement

ACC/209

Principles of Accounting I

Patty Ahmedou Balla

September 9, 2013

This paper will be identifying the four basic financial statements, the purpose of each statement how they are useful to internal users such as manager and employees and external users, such as investors and creditors

Lets first start with The Balance Sheet, this statement has information about the company’s assets and liabilities. Next is the Income Statement, this is used to show how the company is doing financially by showing the expenses and revenue of the company. After this would be the Retained Earnings Statement, this statement is used to show what the company pays out in dividends to the shareholders of the company. Last but definitely not least is the Statement of Cash Flow; this statement would provide a history of incoming and outgoing cash. All of these statements are equally important and they all work together to bring a well rounded view of how the company is doing and how the company manages their assets, liabilities, cash and dividends. However each type of user, internal and external may utilize the Financial Statement differently. The internal users would be managers and employees and even though both users are internal, the financial statements would be used differently.

Managers can use the financial statement to project future employee needs, and to forecast future goals for upcoming months. An example of this would be retail companies; around major holidays a company will look at their previous year sales and will project from that number what their staffing needs should be. Even if they over staff it is easier to let people go early from their shift as opposed to bringing people in. Another example would be collection agencies; a collections manager will look base the next month’s goal on the previous month’s revenue numbers. If the collectors are reaching the target number for collected debt, the supervisor will typically raise the number making it harder...