Week 1 Assignment

ACC/561-Accounting
October 5, 2011
Dr. Terry Chen

When it comes to documenting financial statements, it is vital that they are clear, based on specific data, and can be used for the decision making process to be effective. In this case, there are four financial statements that will be reviewed; the balance sheet, the statement of cash flows, the income statement, and the retained earnings. These four all prove to be important in different aspects of business as it relates to “the numbers” game. The questions that are to be addressed in this paper is which of these statements will appeal to the likes of creditors, interested investors, and management.

Income Statement

The income statement takes into account the expenses and revenue. The income statement is also known as the profit loss statement is exactly what it says. The records from these numbers can be linked to how successful a company has been. The use of the income statement is to reveal to investors and management the monetary gains and losses in a certain window of time. This proves the saying that “Time Is Money” to be somewhat of the essence. When expense comes into play, the focus is profit. According to "Investopedia" (2011) “A company’s expense is the costs “economically” that it assumes through the process of trying to gain revenue.” The key is to minimize or reduce expenses without relying on revenues which in turn will yield positive profits. This would be a good focal point that would peak the interest of investors because their main goal is to make smart investments that will yield a positive profit. Creditors could look the income statement to see if it would benefit them to lend to the company. Managers would benefit from the income statement because it would allow them to see where they stand as far as making changes in order to increase profits. They can