University of Phoenix
October 10, 2012
Financial Statement Differentiation
Every business in today’s society uses financial statements. Regardless of the size of the business, they must prepare this statement to ensure that his or her business is running smoothly. It also gives the business insight into the financial condition of the business. The stakeholders use the information from these statements to make decisions and determine to invest in a particular company or business. Most businesses prepare monthly, quarterly, and yearly financial statements. “When using these reports, the reports show the monetary figures or s specific period. The four types of financial statement that most businesses use are: the balance statement which represents a snapshot of the business financial position at any specific time period. The financial statements contain monetary information in the business equity, capital, liabilities, and assets of a business for a given time period” (Ingram, 2012, p. 1). The balance sheet shows the assets and the liabilities in the company. The balance statement only tells how the company stands on one particular day,
The Income, and expenditure statement shows the business movement for a specific period of time. It shows the income earned and spent by the business. When the income exceeds the sales, the business had made a profit, and when they spend more than they take in, this causes the business to suffer a lost or lose profits. Preparing the income statement is for monetary items. The income statement shows figures in both the gross and net terms.
The Cash Flow statement tracks the inflows and outflows of cash during a specific statement period. The business can access its cash at a specific time during the year. There are three major parts to the cash flow statement, which are the operating, investing, and the financing cash flow....