Finance Statement

Financial Statements Paper

Financial statements are formal records of the activities of a company, person or business entity. The purpose of financial statements is to enable a business to establish the results of its operations over a period of time and determine its worth at a specific date. This paper will identify the four basic financial statements and describe the purpose for each. This paper will also discuss how financial statements are used by internal and external users and the significance of each.

Financial Statements Types

The Income statements, cash flow statement, balance sheets, and statement of owner’s equity (also known as the retained earnings statement) are the four types of financial statements. Each of these statements is interrelated and necessary for business decisions and required for reporting purposes.

Financial Statements Purpose

The balance sheet statement, gives precise data about a business, finance and liabilities. It provides a position of the finances of a company in specific time point and this balance sheet is made up of two parts which shows that the company’s assets are balances with the company’s financial obligation or liabilities.

An income statement is a report that lists the amount of revenue a company has as well as the related expenses which determine the net loss or net income over a specific period of time. It usually covers a year or a portion of a year such as a quarter. This statement also includes the cost and expenses associated with earning that revenue. The crucial element of the income statement is the bottom line or net profit or net loss for that period.

The statement of a cash flow reports the money that goes in and out of a business. This statement is crucial in the planning process because company’s need to know how much cash is on hand at any given time. A cash flow statement usually has three parts which include operating activities, investing activities and financial activities....