Financial Statements Paper

Financial Statements Paper

Leon Jordan

ACC/280

December 20, 2010

Instructor: Curt Mencer

Financial Statements Paper

The Purpose of Accounting

A method used in support of business and household financial decision-making is defined as accounting. Accounting identifies various classifications and measures the revenue performance of the organization through an informational process. The main function of accounting is to record and track transactions for the communicative purposes of stakeholders and to provide a transparent audit trail for the organization.

Identify the Four Basic Financial Statements

The fundamental financial statements are: Income Statement, Balance Sheet, Cash Flow Statement and Statement of Changes in Equity. Each report focuses and serves as a resource for employees, suppliers, government, lenders, investors, and customers in some capacity. The contents and information in these reports supply these entities knowledge of what the organization’s stability, worth, and activity enclose.

Income Statement

The Income Statement represents the organization’s profits and losses. The Income Statement is also referred to in accounting language as The Profit and Loss Statement. This statement lists the organization’s earnings, overhead costs and all expenses in a particular accounting period.

Balance Sheet

The Balance Sheet informs stakeholders of the organization’s assets, liabilities and the owner’s equity. This pecuniary report acquaints with the financial pose of the company.

Cash Flow Statement

This statement shows the organization’s funds’ earnings and disbursements and is also called Statement of Changes in the Financial Position.

Statement of Changes in Equity

This report displays modifications in the owner’s equity and clarifies discrepancies from a specific period of time in the accounting cycle.

Explain How Financial Statements Interrelate to Each Other...