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Financial Statements Paper

Sarah Jobst


July 25, 2012

Markesha Brock-Johnson

Financial Statements Paper

There are four basic financial statements which are the balance sheet, income statement, retained earnings statement and the statement of cash flows (Kimmel, Weygandt, & Kieso, 2009) . Each of these reports plays a major role in the success of businesses. The following paper will take a look at each of the statements and explain in further detail how exactly each one can help the business both internally and externally.

Balance Sheet

The balance sheet presents a picture at a point in time of what your business owns (assets) and what your business owes (liabilities) (Kimmel, Weygandt, & Kieso, 2009). The balance sheet reports the quantity of assets and the claims to assets for a time period (Kimmel, Weygandt, & Kieso, 2009). Assets are products the company owns which help them make their money. Claims to assets however are either a lender or proprietor.

Income Statement

The income statement reports the revenues and expenses to show how successfully your business performed during a period of time (Kimmel, Weygandt, & Kieso, 2009). The income is the revenue funds and the expenses are outgoing funds.

Retained Earnings Report

The retained earnings report indicates how much of previous income was distributed to you and the other owners of your business in the form of dividends, and how much was retained in the business to allow for future growth (Kimmel, Weygandt, & Kieso, 2009). This report is usually for the same time period as the income statement covers.

Statement of Cash Flows

The statement of cash flows shows where your business obtained cash during a period of time and how that cash was used (Kimmel, Weygandt, & Kieso, 2009). Cash receipts and payments can indicate a company’s cash status. This can help investors, creditors and others in analyzing a company’s cash status.

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