Financial Statements
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Information about a company is reported on financial statements that show the company’s financial state of being. Reports made on a balance sheet, an income statement, a retained earnings statement, and a statement of cash flows show different aspects of a company’s financial situation. Lenders, creditors, and investors use these documents for determining the future prospects of the company. Managers within the company also use these documents to make decisions about the daily operations of the company. The income statement reports the success or failure of a company’s operations for a period by listing the company’s revenues and expenses (Kimmel, Weygrandt, & Kieso, 2003). The net income of the company is determined on the income statement by deducting expenses from revenues (Kimmel, Weygrandt, & Kieso, 2003). The retained earnings statement shows the amounts of retained earnings during a period, and the causes of changes in those amounts. Retained earnings are the net income retained in a company not paid in dividends to stockholders (Kimmel, Weygrandt, & Kieso, 2003). The balance sheet reports the assets, the liabilities, and the stockholders equity within the company at a specific point (Kimmel, Weygrandt, & Kieso, 2003). Assets on the balance sheet are balanced against liabilities and stockholders’ equity (Kimmel, Weygrandt, & Kieso, 2003). The statement of cash flows provides financial information concerning the cash receipts and cash payments of a company for a specific period, including the amount of cash at the end of the period and the net increase and decrease (Kimmel, Weygrandt, & Kieso, 2003). The statement of cash flows includes a report of the cash effects of operating activities, investing activities, and financing activities to assist in the analysis of the