Financial Statement Differentiation Paper
Financial Statement Differentiation Paper
ACC/HC561
Financial Statement Differentiation Paper
Financial statements are what companies use to give management, creditors, and investors information about the financial stability of their organization. This is one way for the company to measure and quantify their financial performance. Throughout the paper the discussion will be based on the four types of financial statements and who would benefit from them.
The Four types of Financial Statements There are four types of financial statements that most organizations use to report financial information. The four common types are income statement, balance sheet, statement of cash flow, and the retained earnings statement.
Income Statement An income statement is essentially a profit and loss statement that denotes the sales, profits, and expense during a specific time. The income statement also shows any cost that may be associated with the revenue. The bottom line of the statement shows the actual earnings and loss of the company over that specified time. While looking at a financial statement it could be compared to a check book register. Starting with the total revenue a deduction is then made for each expense or cost \that coincides with the revenue. This statement shows if the company was at a loss or if they made a profit. An income statement tracks revenues and expenses. Those most interested in this statement would be management. They would use the statement to determine the operating performance. Creditors could also use this to base the credit worthiness of that company.
Balance Sheet Balance sheets show a snapshot of a company’s assets, liabilities, and how equity is allocated. A balance sheet is set up like basic accounting with assets on the left and liabilities and shareholder equity on the right. The balance sheet does not indicate money going in and out of the accounts during the specified period. The balance sheet
ACC/HC561
Financial Statement Differentiation Paper
Financial statements are what companies use to give management, creditors, and investors information about the financial stability of their organization. This is one way for the company to measure and quantify their financial performance. Throughout the paper the discussion will be based on the four types of financial statements and who would benefit from them.
The Four types of Financial Statements There are four types of financial statements that most organizations use to report financial information. The four common types are income statement, balance sheet, statement of cash flow, and the retained earnings statement.
Income Statement An income statement is essentially a profit and loss statement that denotes the sales, profits, and expense during a specific time. The income statement also shows any cost that may be associated with the revenue. The bottom line of the statement shows the actual earnings and loss of the company over that specified time. While looking at a financial statement it could be compared to a check book register. Starting with the total revenue a deduction is then made for each expense or cost \that coincides with the revenue. This statement shows if the company was at a loss or if they made a profit. An income statement tracks revenues and expenses. Those most interested in this statement would be management. They would use the statement to determine the operating performance. Creditors could also use this to base the credit worthiness of that company.
Balance Sheet Balance sheets show a snapshot of a company’s assets, liabilities, and how equity is allocated. A balance sheet is set up like basic accounting with assets on the left and liabilities and shareholder equity on the right. The balance sheet does not indicate money going in and out of the accounts during the specified period. The balance sheet
References: Federal Accounting Standards Advisory Board. (2011). Retrieved from http://fasab.gov/accounting-standards/authoritative-source-of gaap/ Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting: Tools for business decision making (3rd ed.). Hoboken, NJ: John Wiley & Sons