Financial Statement Paper

Financial Statement Differential Paper

Johnny B. Shaw, Jr.

ACC/561

7-7-11

Vern Vernazzaro

Financial Statement Differential Paper

In today’s business world, Corporate America’s accounting functions are under scrutiny. However, accounting principles maintain organizational flow of money in identifiable terms and when properly understood and executed- benefit a corporation. Along with defining the four basic financial statements, this paper will explain the relationship between financial statements and the benefits to all organizational participants. The primary purpose of accounting is to identify and explain basic accounting transactions that have a direct financial impact on an organization. Financial reports are driven by a specified accounting period, usually every three months (quarterly). An organization’s main emphasis is to earn profits and remain financially sound throughout the business cycle.

One main objective is to ensure there is sufficient capital on hand to pay creditors, workers, and to sustain the organization’s day-to-day functions. Accountants primarily use financial statements as records of monetary activity. Financial statements provide an accounting overview of the short term and long term pecuniary health of a corporation. Additionally, the financial reports are to be made readily available to creditors, investors, and tax authorities. The four basic financial statements related to accounting, include the following:

Income Statement – this statement is also called a profit and loss statement, and reports a corporation’s income, expenses, and profits over a particular time period. The income statement also illustrates the amount of money associated with specific revenue during a given period. In other words, this information explains how much a company has gained or lost over a particular time. The income statement does not show when revenue accumulates or when expenses are paid. However, it does include a...