Understanding Accounting and Financial Information

Understanding Accounting and Financial Information

A company’s financial status provides various financial information that investors and creditors used to evaluate a company’s financial performance. The financial statement perspectives provided in this overview are meant to give readers the big picture. With these considerations in mind, beginning investors should be better prepared to cope with learning the analytical details of discerning the investment qualities reflected in a company's financials. It’s the financial statement that reveals whether the business is actually earning a profit or losing money. The income statement includes valuable financial information for stockholders, lenders, potential investors, employees, and of course the government. (Understand Business, tenth edition, P.476). I had searched a lot about understanding the financial statements on the internet and I had read many articles about financial statements and what does it consists? Like Assets and Liabilities and how should it calculate. GAAP, or Generally Accepted Accounting Principles, are the guidelines that accountants must follow to ensure that data in financial statements are not manipulated. Since the purpose of financial statements is to inform investors of a business' financial health, the accountants who prepare these statements must follow specific standards.

GAAP is used in the preparation of balance sheets, measurements of shares and revenue recognition. Although GAAP gives us guidance, it also allows for a considerable amount of flexibility in presenting financial information. The Notes must accompany the other financial information, and includes disclosure about accounting principles, lawsuits, lease obligations, concentrations of receivables, and other information the FASB considers necessary for adequate disclosure of important information. Companies use it as a tool for improving recruitment and retention, for managing workload, and for responding to employee...