Acc 561 Financial Statement Paper

Financial Statement Differentiation

Joshua Tabaka

University of Phoenix

ACC/561

WH12MBA06

March 20, 2013

Instructor: Norris Dorsey

Workshop 1

Financial Statement Differentiation

There are four major types of financial statements and they include the balance sheet, income statement, statement of equity and statement of cash flows.

The balance sheet shows the assets, liabilities and equity balances as of a given point in time. It will typically show the short-term and long-term liquidity and obligations of the company, as well as the leverage of the company and capital structure (Investopedia, 2013) .

The income statement shows the components of profit and loss for a certain accounting period. It will typically also show subtotals for gross profit, operating income, and net income after taxes. Normally this is shown over a quarter or fiscal year (Investopedia, 2013).

The statement of owners’ equity shows the activity with the company’s owners for a specified period of time. It will also show changes in assets and liabilities that do not impact income, such as unrealized gains and losses on securities (accounting-basics-for-students.com, 2013)

The statement of cash flows shows the cash inflows and outflows of the company for a specified period of time. All companies are required to provide this report to the SEC quarterly (Investopedia, 2013). The first of two ways to prepare a statement of cash flows if the direct method, which shows the actual inflows and outflows of cash and investment income. The second, indirect method starts with net income and then reconciles net income to the cash inflows and outflows.

Investors will often be most interested the income statement, because it shows how much money the company has made in a certain period. It also shows as its bottom line a calculation of earnings per share, which will be important to the investor in anticipating current and future dividends.

Creditors would often be most...