University of Phoenix
October 24, 2011
Financial statements for a business enterprise are all the relevant financial information, presented in structured manner and in an easy form to understand. “Assets, liabilities, expenses, and revenues are of interest to users of accounting information. This information is arranged in the format of four different financial statements … forming the backbone of financial accounting” (Kimmel, Weygandt, & Kieso, 2009, p. 12). There are four basic financial statements that are produced by an organization for reporting: balance sheet, income statement, retained earnings, and cash flow. “In this paper the financial statement will be briefly defined as well as how and why these statements would be of interest to specific group(s): creditors, investors, and managers.
According to investopedia a balance sheet is a “statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders”(Investopedia, 2011). Creditors will have the most interest in the balance sheet because it allows them to determine whether they will be repaid for financing that the organizations has used for assets that were purchased from the creditors. Another party that would have interest in the balance sheet would be investors. Investors used the balance sheet to understand the nature of stock and the amount of retained earnings available for future payouts to investors. Managers would have interest in a balance sheet because; it allows them to determine if they will have ample cash on hand for immediate cash needs.
Income Statements according to Kemmel (2009, p. 23) “reports the success or failure of the company's operations for a period of time”. The information that is found... [continues]
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(2011, 11). Financial Statement Differential. StudyMode.com. Retrieved 11, 2011, from http://www.studymode.com/course-notes/Financial-Statement-Differential-826749.html
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