Financial Statement Differentiation

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Financial Statement Differentiation
A Financial Statement can be defined as, “Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial position” (Business Dictionary, 2011). The Financial information is required for various users to make an informed Decision. “The purpose of financial information is to provide inputs for decision making” (Kimmel, Weygandt, Kieso, 2009, Para 1, p. 6). There are four different parts covered in a Financial Statement; those are Balance Sheet, Income Statement, Retained Earnings Statement, and Statement of Cash flow. The assignment will elaborate the purpose of each statement and differentiate its utility for different users. Balance Sheet

“The balance sheet reports assets and claims to assets at a specific point in time” (Kimmel et al., 2009, p. 14). The Balance sheet gives the exact money value worth of the assets over the liabilities of the company as of the specified time mentioned. The Balance sheet formula is “Assets = Liabilities + Stockholders’ Equity” (Kimmel et al., 2009, p. 14). The various resources possessed by a business such as property, cash, and equipment are Assets. Liabilities include the company’s payables to creditors and owners; the owner capital is also-called as Owner’s equity. A public company publicizes its Balance sheet to the general public. The creditors and investors use this statement to decide if they will invest in or lend to this company. The investors will see the likelihood of their money being repaid by the company. Income Statement

The Income Statement is also-called a Profit or Loss statement. As the name infers the statement shows if the company has made profit or loss during the specified time. “The income statement reports the success or failure of the company’s operations for a period of time” (Kimmel et al., 2009, p. 12). The Income Statement consists of Expense and Revenue, the...
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