Financial Statement Paper

Financial Statement Paper

Stacy Walker

University of Phoenix

ACC 280

Terrice Watson

August 18, 2008

Financial Statement Paper

Accounting has a significant role in society. People use accounting in their daily lives when assessing interest rates to pay off mortgages, to calculate rates for car payments, to balance checkbooks, and to study financial statements to make proper investment decisions. In business, accounting records the growth of a company by analyzing figures and suggesting ways to keep the business successful. This paper will define the purpose of accounting, identify the four basic financial statements, explain how financial statements are interrelated with each other, and explain why the financial statements are useful to managers, investors, creditors, and employees. Accounting helps you make intelligent decisions in your personal and professional life.

The purpose of accounting is to recognize and notate all activities that influence an organization financially. “Accounting consists of three basic activities: identifying, recording, and communicating economic events of an organization to those interested in learning more about the organization” (Kieso, Kimmel, & Weygandt, 2008). Income statements, retained earnings, balance sheets, and statement of cash flow are four basic financial statements that permit companies to record, analyze, and retrieve financial information. The four basic financial statements can be used to provide reports on purchases, sales, expenses, assets, liabilities, investments, stockholder’s equity, and revenue. The reports are scrutinized to determine the financial stability of the company and give insight to make reliable financial decision. Financial statements show how a company has performed over a period of time.

Income statement, retained earnings statement, balance sheet, and statement of cash flow reflect the financial position of a company and all are equally...