Financial Statements Paper

Running Head: FINANCIAL STATEMENTS

Financial Statements

A Students Name

Institution

Financial Statements

Accounting is the process that financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties (Price, Haddock, & Brock, 2007). The information from the accounting information is communicated through the four basic financial statements: the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows.

The purpose of accounting is to identify, record, and provide all activities that affect the organization financially, and communicate the financial position of the business to individuals, agencies, and organizations. The company's financial status or condition is based on the reports generated through the processes of accounting. The accounting information users use the accounting information to make decisions about the future of the company. The accounting information communicates the financial information to internal and external parties.

The internal parties that the financial information concerns are managers, owners, and employees. The owners are interested in the financial information to make important decisions concerning the organization. The owners use the accounting information to understand if the company is profitable, and the current financial condition of the company. If the company is bringing in a profit then the owner can consider making new investments for continual growth. If the business is not doing well and producing a loss for a consecutive period of time then the owner must consider closing the business or reducing the expenses of the company to bring it back into profitability.

The managers use the accounting information to create benchmarks and quotas for sales, and reduce the costs that occur in the daily operations of the business. Some of the decisions that are made, with the use of...