January 23 2013
The paper is going to talk about accounting, and identify the four basic financial statements. The paper explains how the different financial statements are useful to internal users like managers and employees and external users like investors and creditors. Accounting is the process of communicating financial information about the businesses to managers, investors, creditors, and employees. Accounting is also a tool for the business or companies to analyze, retrieve, and record important financial information that can determine company’s financial situation. The purpose of accounting is to help understand people about the financial situation of the company and make help them make safe financial decision. The key of success for accounting lies in the effective communicating and how the information is recorded on the four financial statements. Income Statement, Retained Earnings Statement, Balance Sheet, and Statement of Cash Flow.
The four basic financial statements of accounting are the Income Statement, Retained Earnings Statement, Balance Sheet, and Statement of Cash Flows. The income statement reports companies profit and loses for a period of time. The income statement also records companies revenue and expenses occurred during that period. (Formula: Revenue-Expenses=Net Income or Net Loss). The retained earnings statement shows increases and decreases to stockholders equity accounts for a specific period of time (Formula: Stockholders Equity= Common Stock + Retained Earnings). The Balance Sheet reports assets, liabilities, and stockholders equity. It shows companies financial situation on a particular data. Balance sheet record what company Owens and also what it owned (Formula: Assets= Liabilities+ Stockholders equity). The statement of cash flow records the financial information of the company’s cash...
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