four types of financial statements
Financial Statements
ACC 290
March 4, 2013
Financial Statements come in four basic types; income statement, retained earnings, the statement of cash flow and the balance sheet. These statements are used both internally and externally to calculate the profitability and liabilities of a company. The financial statements of a company are the window for managers, investors, and creditors into the stability of a company. The details of a financial statement differ from the type of the statement and are used by different entities to determine if they want to invest in the company, lend to the company or by managers to determine if the company is operating and the needed level to continue growing. The income statement is a snapshot for a defined time that lists revenues and expenses to equal the net income of the company. Revenues are broken down into sales and other sales. Expenses are items such as cost of goods sold, selling marketing administrative costs, and total income tax. The income statement reports on the success or failure of the company’s operations by reporting its revenues and expenses. If the company’s revenues exceed its expenses, it will report net income; otherwise it will report a net loss (Kimmel & Kieso, 2009). The income statement reports of the company’s operations are profitable or not. The income statements reports how successful the company is at generating a profit at sales.
Retained earnings statements are statements of shareholders in dividends and earnings paid to owners. This statement shows the earnings kept by the owners to ensure future growth. High-growth companies generally do not pay dividends and reinvest into the company. This statement shows amounts and cause of change during a period in time. The beginning of the statement shows retained earnings and adds net income and deductions for dividends. The balance sheet is the third type of financial statement that show claims to assets over a
ACC 290
March 4, 2013
Financial Statements come in four basic types; income statement, retained earnings, the statement of cash flow and the balance sheet. These statements are used both internally and externally to calculate the profitability and liabilities of a company. The financial statements of a company are the window for managers, investors, and creditors into the stability of a company. The details of a financial statement differ from the type of the statement and are used by different entities to determine if they want to invest in the company, lend to the company or by managers to determine if the company is operating and the needed level to continue growing. The income statement is a snapshot for a defined time that lists revenues and expenses to equal the net income of the company. Revenues are broken down into sales and other sales. Expenses are items such as cost of goods sold, selling marketing administrative costs, and total income tax. The income statement reports on the success or failure of the company’s operations by reporting its revenues and expenses. If the company’s revenues exceed its expenses, it will report net income; otherwise it will report a net loss (Kimmel & Kieso, 2009). The income statement reports of the company’s operations are profitable or not. The income statements reports how successful the company is at generating a profit at sales.
Retained earnings statements are statements of shareholders in dividends and earnings paid to owners. This statement shows the earnings kept by the owners to ensure future growth. High-growth companies generally do not pay dividends and reinvest into the company. This statement shows amounts and cause of change during a period in time. The beginning of the statement shows retained earnings and adds net income and deductions for dividends. The balance sheet is the third type of financial statement that show claims to assets over a
References: Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Financial accounting: Tools for business decision making (5th ed.). Hoboken, NJ: John Wiley & Sons.