Financial Statements Discussion Wk 1

1.) Balance sheet (We will begin with this statement, prior to Wednesday.)

ba. Let's begin by asking the question: What is the purpose of a balance sheet? The purpose of the balance sheet is to report the company’s assets, liabilities and owner’s equity at a juncture in time. More specifically “the balance sheet reports assets and claims to assets at a specific point in time.” (Kimmel, Weygandt & Kieso, 2013, p.14)

bb. What information does it provide... in relation to the basic accounting equation? The balance sheet provides the value of assets on hand, balances of credit accounts also known as liabilities and the value of the stock that the owners of the company hold. The basic accounting equation is Assets= Liabilities + Owner’s Equity. The total of the assets on the balance sheet will be equal to the total of the liabilities and the owner’s equity added together.

2.) Income statement (We will begin this discussion on Wednesday morning.)

cc. What is the purpose of an Income statement? The income statement reports the revenue and expenses of a company for a period of time indicating whether there is net income or net losses.

cd. What information does it provide? It gives the company a view of how they are doing financially. If revenue exceed the expenses there is a net income and the possibility of turning a profit. If the expenses exceed the revenue the company is facing losses. According to Accountingcoach.com “the income statement is sometimes referred to as the profit and loss statement (P&L), Statement of operations or statement of income. The income statement is important because it shows the profitability of a company during the time interval specified in its heading.” (http://www.accountingcoach.com/income-statement/explanation) (n.d.)

3.) Statement of retained earnings (We will begin this discussion on Thursday night.)

de. What is the purpose of the Statement of retained earnings? The statement...