...The Four Basic Financial Statements Marta Karina Briones ACC / 290 July 25, 2013 Professor Louann Schloss The Four Basic Financial Statements There are four basic financial statements in accounting, which are as follow: a balance sheet, an income statement, a retained earnings statements, and an income of cash flows. Each of these statements has their individual purpose in the field of accounting. According to Kimmel (2011),”…the four financial statements form the backbone of financial accounting.” The first statement is an income statement. As reported by Kimmel (2011), “an income statement reports the success or failure of the company’s operations for a period of time.” As explained in the book, the income statement lists the company’s revenues then followed by their expenses. Then, the company can determine their net income by subtracting the company’s expenses from their revenues (Kimmel, 2011, pg. 12). The second statement is the retained earnings statement. As stated by Kimmel (2011), “The retained earnings shows the amounts and causes of changes in retained earnings during the period… it is the net income retained in the corporation.” Additionally, if a corporation is successful during a certain amount of time at the end of that period the company then decides what amount of the earnings (profits) would go to pay shareholders in dividends. However, many company’s do not pay their shareholders and retain the profits within the corporation in order...
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...The four basic financial statements a company can produce are the Income Statement, Retained Earnings, Balance Sheet and Statement of Cash Flows. All these statements are prepared for a specific period in time, usually on a monthly, quarterly or annual basis. The Income Statement summarizes the fees earned, less any operating expenses to show if the company is profitable. The Income Statement uses the matching concept, which means the expenses are matched with the revenue generated in the same time period as the expenses. If the fees earned are greater than the operating expenses, then the company has generated a net profit. If the expenses are greater than the fees earned, then the company has a net loss. The Retained Earnings shows the changes in the retained earnings. The Balance Sheet displays the company’s assets, liabilities and the owner’s equity. The equation for the balance sheet to equal (balance) is asset = liabilities + OE. The Statement of Cash Flows consists of three sections, cash flow from operating activities, cash flows from investing activities, and cash flows from financing activities. Each of these statements uses information from each other. The Retained Earnings statement uses the net income from the Income Statement. The Balance Sheet uses the retained earnings ending balance. The Statement of Cash Flow ties out to the ending balance of Cash in the Balance Sheet. Any corporation or individual that has any financial ties to a company would use this...
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...QUESTION 1 To purchase this visit here: http://www.nerdypupil.com/product/acc-290-week-1-discussion-question-1-2/ Contact us at: nerdypupil@gmail.com ACC 290 WEEK 1 DISCUSSION QUESTION 1 ACC 290 Week One – DQ #1 What are the four basic financial statements? What is the primary purpose of each of the four basic financial statements? In your opinion, which financial statement is the most important? Explain why. How would the financial statements be useful to managers and employees? How would the financial statements be useful to investors and creditors? Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 290 Week 1 Discussion Question 1 in order to ace their studies. ACC 290 WEEK 1 DISCUSSION QUESTION 1 To purchase this visit here: http://www.nerdypupil.com/product/acc-290-week-1-discussion-question-1-2/ Contact us at: nerdypupil@gmail.com ACC 290 WEEK 1 DISCUSSION QUESTION 1 ACC 290 Week One – DQ #1 What are the four basic financial statements? What is the primary purpose of each of the four basic financial statements? In your opinion, which financial statement is the most important? Explain why. How would the financial statements be useful to managers and employees? How would the financial statements be useful to investors and creditors? Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 290 Week 1 Discussion Question 1 in order to ace their studies. ACC 290 WEEK 1 DISCUSSION QUESTION...
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...QUESTION 1 To purchase this visit here: http://www.nerdypupil.com/product/acc-290-week-1-discussion-question-1/ Contact us at: nerdypupil@gmail.com ACC 290 WEEK 1 DISCUSSION QUESTION 1 ACC 290 Week One – DQ #1 What are the four basic financial statements? What is the primary purpose of each of the four basic financial statements? In your opinion, which financial statement is the most important? Explain why. How would the financial statements be useful to managers and employees? How would the financial statements be useful to investors and creditors? Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 290 Week 1 Discussion Question 1 in order to ace their studies. ACC 290 WEEK 1 DISCUSSION QUESTION 1 To purchase this visit here: http://www.nerdypupil.com/product/acc-290-week-1-discussion-question-1/ Contact us at: nerdypupil@gmail.com ACC 290 WEEK 1 DISCUSSION QUESTION 1 ACC 290 Week One – DQ #1 What are the four basic financial statements? What is the primary purpose of each of the four basic financial statements? In your opinion, which financial statement is the most important? Explain why. How would the financial statements be useful to managers and employees? How would the financial statements be useful to investors and creditors? Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 290 Week 1 Discussion Question 1 in order to ace their studies. ACC 290 WEEK 1 DISCUSSION QUESTION 1 ...
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...art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc. Accounting is very important concerning to the business world and keeping up with the money coming in and going out of the company, also a good sign for the people that invest in the business. Accounting helps to tell if it is worth investing in. there are four basic financial statements concerning to accounting, they are balance sheet, income statement, statement of retained earnings, and statement of cash flow. A balance sheet reports the financial position or snapshot of an accounting entity at a particular point. The balance sheet contains things such as amount of assets, liabilities, and stockholders equity. When completing a balance sheet since each asset must have a source of financing, a company’s assets must by definition equal the combined total of its liabilities and stockholders equity. Assets are the economic resources owned by the company. Liabilities are the company’s debts or obligations like bills, or credits owed. Stockholders equity indicates the amount of financing provided by the owners of the business and earnings. ("The Four Basic Financial Statements: An Overview", 2009). The income statement reports the primary measure of performance of a business, revenues less expenses during the accounting period. The income statement , unlike the balance sheet that reports a certain date, whereas the income statement reports for a specific...
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...Financial Statements Paper Accounting information consists several areas of interest for users looking to interact with a business. These areas include assets, liabilities, expenses and revenues. The information reflecting these areas of interest is used to populate financial statements. The backbone of financial accounting is made up of four basic financial statements. These four financial statements are a balance sheet, an income statement, a retained earnings statement, and a statement of cash flows. Users utilize these basic forms to keep track of financial areas of interest in a business such and to make decisions. The balance sheet is used to paint a current picture of what a business owns, or it’s assets. It also paints a current picture of what a business owes, or it’s liabilities. The income statement is used to show just how well or successful a business has done for a certain period of time. In this statement, a businesses revenues and expenses are reported. The retained earnings statement is used to show a couple of key things within a business. First, it is used to show how much previous income was distributed to the owners of the business in the form of dividends. It also shows how much of that previous income was retained in the business to allow for future growth. The statement of cash flows is used to show where a business obtains any cash during any given period of time. It also details how the business used these monies in that specified...
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...accounting, identify the four basic financial statements, and explain how they are interrelated and whom they are useful to. Accounting “Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users” (Weygandt, Kimmel, & Kieso, 2008, p. 4). Economic events are accounting transactions that a company identifies and records to communicate this information to interested parties. For example, Apple computers first identifies that a computer sale is an economic event relevant to its company. An example of an economic event to Apple computers is selling an Apple iPod. When this transaction takes place, it is recorded in a systematic manner to create a chronological diary of events (Weygandt, Kimmel, & Kieso, 2008, p. 21). Four Financial Statements There are four different and interrelated basic financial statements that companies prepare from summarized accounting data. The first statement is the income statement. The income statement presents the net income (when revenues exceed expenses) or net loss (when expenses exceed revenues) of a company based on the revenues and expenses for a specific period. The next financial statement is the retained earnings statement. “A retained earnings statement summarizes the changes in retained earnings for a specific period of time” (Weygandt, Kimmel, & Kieso, 2008, p. 21). For example, if a company creates the four financial statements, and it is for the end of...
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...RUNNING HEAD: FINANCIAL STATEMENTS PAPER Financial Statements Paper ACC 290 Financial Statements Paper In this paper the four basic financial statements will be defined. Each of the four financial statements has its purpose for use. As part of the paper the description of the purpose of the four basic financial statements is acquired. The discussion of the financial statements would be useful to internal and external users is performed as well in this paper. The four basic financial statements are the balance sheet, income statement, retained earnings statement, and statement of cash flow (Kimmel, Weygandt, Kieso, 2011). The balance sheet is used to present a picture of what a company owns (Kimmel, Weygandt, Kieso, 2011). The balance sheet reports the amount of assets and claims to assets for a period of time (Kimmel, Weygandt, Kieso, 2011). Assets are items the company owns that could be used if needed to retain cash. The claims to assets are either creditor or owner. The creditor would be the individual or company that is using the asset as collateral to a debt. Once debt is paid the creditor releases asset back to owner. The income statement is used report the financial health of the company in a certain time frame (Kimmel, Weygandt, Kieso, 2011). The income statement provides the revenues and expenses in the time frame (Kimmel, Weygandt, Kieso, 2011). The revenue is the income funds, and expenses are the outgoing funds. The...
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...Financial Statement Paper April 14, 2011 Devina Stocking ACC/280 Salil Sharma Financial Statement Accounting is an essential part of the business world today. Accounting “identifies, records, and communicates the economic events of an organization to interested users” (Weygandt p. 4). Accounting shows organizations what is happening financially within the organizations. Accounting shows where the cash is going and where cash is coming from. Accountants analyze and interpret the financial information on the financial statements using ratios and graphs. The information that is being analyzed are comprised into financial statements. The four basic financial statements include; income statement, statement of retained earnings, balance sheet and statement of cash flows. The income statement “presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time” (Weygandt p. 21). The retained earnings statement “summarizes the changes in retained earnings for a specific period of time” (Weygandt p. 21). The balance statement “reports the assets, liabilities, and stockholders’ equity of a company at a specific date” (Weygandt p. 21). The statement of cash flows “summarizes information concerning the cash inflows (receipts) and outflows (payments) for a specific period of time” (Weygandt p. 21). The income statement, statement of retained earnings and statement of cash flows all depict a period of time whereas the balance sheet is...
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...Financial Statements In business there are many factors that make an organization a success or a failure. One of the major components in business is accounting and businesses need structure in sells, marketing, promotion or exposure, and a well develop product that society must consume. Looking at all these factors gives business owners a defined idea on how a company should be relevant and profitable in the business world. On the other hand, accounting is probably the most important aspects that need to be in place for a company to exist and make profits. Accounting is probably viewed in many ways but there is four basic elements in the financial statements. The following paragraphs would address the purpose of accounting, the four basic financial statements, relationships between internal and external users, and interrelation with each other. Definition of Accounting Accounting is a difficult task for many people, grasping the concepts of accounting can sometimes be intimidating. Nevertheless, the purpose or reasons accounting is so important are a matter survivability or failure in any organization. According to Weygandt (2008), accounting consists of three basic activities—it identifies, records, and communicates the economic events of an organization to interested users. On the other hand, “The process of preparing financial statement for any business is called financial accounting (Weygandt, 2008). Identification deals with daily transactions such as sells and purchases...
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...stakeholders. Those stakeholders rely on four primary financial statements: the income statement, the capital statement, the balance sheet, and the statement of cash flows. Naturally, you begin by studying those four financial statements and the accounting processes that lead to their creation. Those processes include recording financial transactions in journals and then posting to the general ledger. In this first week, you learn the purpose of those four statements, what the financial statements include, and how the financial statements are constructed to provide valuable information to stakeholders. You also learn the basic mechanics of accounting. These include journalizing transactions into accounting records using debit and credit rules. You also learn why the general ledger is critical to the accounting process and how transactions are posted to the general ledger. Basic Accounting Principles and Concepts OBJECTIVE: Identify the four basic financial statements. Resources: Ch. 1 & 2 of Financial Accounting Content • Ch. 1: “Introduction to Financial Statements” o Forms of Business Organization • Internal Users • External Users • Ethics in Financial Reporting o Business Activities • Financing Activities • Investing Activities • Operating Activities o Communicating with Users • Income Statement • Retained Earnings Statement • Balance Sheet • Statement of Cash Flows • Interrelationship of Statements • Other Elements of an Annual Report ...
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...Financial Statements Paper Arian George ACC/290` September 18, 2013 Susan Bowers Financial Statements Paper When talking about financial statements there are four basic statements. There are four basic statements used by businesses and each has their own purpose, these statements are also used but both internal and external users. The internal users are people such as mangers and employers and the external users are people such as investors and creditors. These different statements show the financial activities of a business and can be prepared at any point in time of the year for any time frame. The four basic financial statements are balance sheet, income statement, statement of retained earnings and statements of cash flows. These four statements are prepared by organizations, so they can be used by investors, creditors, and other decision makers and each have specific purposes for the business (Kimmel, PhD, CPA & Weygandt, PhD, CPA, 2009). The balance sheets purpose is to report the financial standing of the company such as the assets, liabilities, and stockholder’s equity which can be ran at specific times (Kimmel, PhD, CPA & Weygandt, PhD, CPA, 2009). The income statement’s purpose is to report to the accountant, of the company, the primary measure of performance of the business, incoming and outgoing money during the accounting period. Accountants would rather gage performance by the net income or net earnings. Statement of retained earnings is self-explanatory...
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...Financial Statements ACC/280 July 23, 2011 Cary Schulz, Facilitator Financial Statements Accounting is a critical aspect of any organization; without accounting a business will not be successful. This paper will inform one of the purposes of accounting; the four basic financial statements; how the basic financial statements are interrelated; and why they are useful for managers, investors, creditors, and employees. Accounting is crucial for every business. Purpose of Accounting Accounting is the information system that records, identifies, and communicates an organization’s economic events to interested users (Weygandt, Kimmel, & Kieso, 2008). The definition of financial accounting is the field of accounting that treats money as a means of measuring an organization’s economic performance as opposed to a factor of production. This is comparable to cost accounting (Walden University, 2011). Financial accounting involves the entire system of controlling and monitoring money as it comes in and out of the organization as liabilities and assets; as well as revenues and expenses (Walden University, 2011). Financial accounting pulls together and summarizes the financial data to produce financial reports, such as a balance sheet and income statement for an organization’s investors, lenders, management, tax authorities, suppliers, and other stakeholders (Walden University, 2011). Financial accounting provides financial and economic data for creditors, investors, and...
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...Financial Statements Amber Khan University of Phoenix Principles of Accounting 1 ACC-290 Jean Balla May 9, 2012 Financial Statements Identify the four basic financial statements The four basic types of financial statements are balance sheet, income statement, statement of owner’s equity, and lastly statement of cash flow ("The Four Financial Statements", 1999-2010). Describe the purpose of each of the four financial statements. A balance sheet is used to summarize the finances of a company during a specific period of time. The sum of company’s liabilities and the owner’s equity should be equal the assets and finding the balance between the two is why this report is called a balance sheet. An explanation of the components of a balance sheet could be: Assets = Liabilities + Equity ("The Four Financial Statements", 1999-2010). An income statement is a representation of company’s profit or loss. The statement includes figures from sales and expenses. The difference between revenue and expenses is the company’s net income. An income statement is usually compiled monthly to keep track of the company’s progress. The purpose of owner’s equity statement is to compare owner’s equity from the start of the period to the end of that period. Owner’s equity combines information from both the income statement and balance sheet as an owner’s equity is determined by adding the investments and income and subtracting this figure from withdrawals...
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...Week 1 Financial Statements Paper John Dow ACC/290 2/24/2014 Week 1 Financial Statement Paper. In the accounting realm there are many terms that get tossed around and it can become quite baffling. The great thing I have learned thus far is that there are four basic financial statements that we operate on today. These statements are very important to the vitality of a company/corporation to continue business in a progressive fashion. In the following text I will articulate the needs and importance of the four basic financial statements, and why they are necessary. The four basic financial statements are: * Balance sheet. * Income statement. * Retained earnings statement. * Statement of cash flows These four statements are essential to the successful operating of a company. With these four statements you can feel prepared when you head to a bank and request a loan for your business, or decide to invest into the stock of a company. These four statements also hold the required information to properly lead a company to higher growth potential and sustainability. The balance sheet is a term that most have heard of, this statement tells the internal or external user of the total assets owned compared to the liabilities or debt at a certain time. This statement is crucial for internal use so that managers can decipher whether they have cash on hand, or if there are going to be layoffs. Lending companies require companies to hand over their balance sheet to...
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