Week One Individual Assignment: Financial Statements Paper

Week One Individual Assignment: Financial Statements Paper

ACC/280

Week One Individual Assignment: Financial Statements Paper

“Companies prepare four financial statements from the summarized accounting data. These statements are: 1. an income statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time. 2. A retained earnings statement that summarizes the changes in retained earnings for a specific period of time. 3. A balance sheet that reports the assets, liabilities, and stockholders’ equity of a company at a specific date. 4. A statement of cash flows that summarizes information concerning the cash inflows (receipts) and outflows (payments) for a specific period of time” ( Weygant, (2008), p. 21). Each of the four statements provides relevant financial data for internal and external use e.g. managers, investors, creditors, employees, and the public (in cases of publicly traded stocks). Wygant also found it important to note that these four statements are interrelated ( Weygant, (2008)).

Let us take a deeper look at each of the four statements starting with Income Statement. The income statement reports the success or profitability of the company’s operations over a specific period of time. It is prepared from the data appearing on the retained earnings statement. The heading of the statement will identify three specific items; the identification of the company, the type of statement, and the time period covered by the statement. The income statement lists revenues first, followed by expenses. Finally, the statement shows net income (or net loss).When revenues exceed expenses, net income results. When expenses exceed revenues, a net loss results ( Weygant, (2008)).

Next let us look at the Retained Earnings Statement. In our text Financial accounting by J.J. Weygant (2008)(Weygant J.J. (2008) Financial accounting (6th ed.)....