Working Document

Financial Statement Differentiation Paper

Overview

In all cases business owners and managers must maintain and have available their company financial information to make competent business decisions regarding current and future operations. Financial statements are prepared by the company during the end of an accounting period to support the financial and economical activity of a business or company over a period of time.

This paper will discuss the four types of financial statements and the information the statement provides, and provide information on which statements are of most interest to creditors, managers and investors.

Four Types of Financial Statements

Balance Sheet

The Balance Sheet is the financial statement that provides data on the business or company’s assets, liabilities and equity. Assets are those things that are owned by the company that has monetary value. Liabilities are that amount that the company owes out to others. Equity is what the company has left over after all the bills are paid and any assets sold. The formula used in the balance sheet is Assets = Liabilities + Equity.

Income Statement

Income Statement is the company’s report on how much income intake or revenue earned during a designated time period. This type of statement can determine whether a business is operating in the red towards failure or in the green towards success. The Income Statement can provide information to determine causes of end results. The statement segregates receipts and expenditures according to the appropriate cause motivator.

Retained Earnings Statement

Retained Earnings Statement provides the amounts and causes of change in the retained earnings during a period of time. This refers to the shareholders dividends received from a business or company based on the amount of stock they hold in the company. When companies hold shareholder meetings, a business decision may be made to leave all or a portion of the retained earnings from...