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Date Submitted: 05/22/2011 07:51 AM
Financial Statement Paper
ACC/280
May 02, 2001
University of Phoenix
Abstract
This paper will provide insight on the purpose of accounting; the paper will also identify the four basic financial statements. This paper will explain how each of the individual financial statements is interrelated with each other; the paper will also explain why they are useful to managers, investors, creditors, and employees.
Financial Statement Paper
The purpose of accounting is to identify record and communicate all of an organizations financial activity. Accounting provides a history of an organization financial activity over a specific period of time, and this information is communicated to interested users. An example of these activities would include purchases such as supplies, equipment, uniforms, advertisement, etc. Another example would be sales such as property, products, services, etc. Any capital or interest that has been earned from investments or other financial activities must also be recorded and posted in their specific accounts, (eHow, 2011).
The four basic financial statements are the income statement, retained earnings statement, balance sheet and the statement of cash flow. The income statement gives information on a company’s financial performance over a specific period of time. According to, (eHow, 2011), it outlines the revenue or sales earned as well as the liabilities or debts incurred in a month, quarter or year. The retained earnings statement provides information on why earnings have increased or decreased with in a specific period of time. According to (Kimmel, P. 2008), if there is a net loss, it is deducted with dividends in the retained earnings statement. The Balance sheet provides information on the organizations assets, liabilities, and stockholders’ equity for a specific time period. According to (Kimmel, P. 2008), the balance sheet is like a snapshot of the company’s financial condition at a specific moment in time...