Financial Statement Differentiation

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  • Topic: Income statement, Balance sheet, Financial statements
  • Pages : 3 (703 words )
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  • Published : February 18, 2013
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Financial Statement Differentiation
The four financial statements include; income statements, retained earnings statements, balance sheets, and statement of cash flows. Business managers, creditors, and investors use financial statements for decision-making purposes. Income statements give an accounting of positive or negative aspects a company’s operations for a period of time. A retained earnings statement shows the amounts and origin of adjustments in retained earnings during a period. In addition, balance sheets report a company’s assets and declarations to assets at a specific point in time. On the other hand, a statement of cash flows provides financial information about the cash receipts and cash payments of a business for a specific period of time; cash in and cash out. The financial statements are used by both internal and external customers. These statements provide vital information and assist companies in measuring success. Balance Sheet

Financial statements compose a structured report of facts subject to accounting and are provided to users (Suhányiová & Suhányi, 2012). Internal and external customers use financial statements. For example, balance sheets help in determining if a company’s assets, liabilities, and stockholder’s equity “balance” out (Kimmel, Weygandt, & Kieso, 2009). A company’s balance sheet would be of interest to creditors and managers. Creditors use a company’s balance sheet to get an idea of whether or not the company will be able to repay a loan. However, managers use balance sheets to determine if the cash on-hand is adequate to meet immediate needs and to monitor the company’s debt and common stock financing ratio (Kimmel, Weygandt, & Kieso, 2009). Income Statement

Income statements would be of interest to creditors and investors. According to Kimmel, Weygandt, and Kieso, income statements give an accounting of the success or failures of a company’s operations over a period of time. Income statements are...
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