Financial Statement Paper

Piertus Esperience

ACC/290

February 4, 2014
Tim Callaghan

Financial Statement Paper

There are four financial statements that are prepared to represent the financial position and operations of a company. The four financial statements are income statement, statement of retained earnings, balance sheet, and statement of cash flows. The income statement reports the revenue, expenses, and results of operations for a particular company in a specified period of time. The difference between the revenues and expenses is identified as the net income or net loss. The statement of retained earnings is the income of the business that has not been paid out in dividend. Over a period of time, retained earnings will either increase or decrease. The balance sheet states the economics resources owned by an entity and the claims against those resources. The balance sheet reflects the fundamental accounting equation, assets equals’ liability plus owner’s equity. The statement of cash flows shows how cash is generated and expended in a period of time however, that is not the same as income. The statement of cash flow has three sections which are the operating activities, investing activities, and financial activities.

The purpose of financial statement is to allow businesses to establish themselves to be financial stable over a period of time. Financial provides information, performance changes of enterprise; that is useful information to users when it comes to decision making. The financial statements need to be significant, clear, reliable and comparable. Income statement provides investors with accurate explanation of the company’s profitability over a period of time. The income statement is also called the profit and lost statement, the income earned and the expenses paid by a business during the time being