Prof. Lisa Parker
Financial Statement differentiate
In a company everything must be done properly especially in accounting because it is important in the finance aspect. The company must have proper accounting in order to successfully make it and avoid a disaster . This paper will explain and identify the four basic financial statements and who use it and why.
The balance sheet used to show the company's net worth. Another name that balance sheet is known to be the "Statement of Financial Position", the company's balance sheet statement that will show the assets, liabilities and owner's equity all together. The basic classic equation for that balance sheet : Assets=Liabilities+ Equity. The balance sheet help managers to find out if the cash that is on hand can it be enough for any instant cash needs. Balance sheet are usually used at the end of the month or the end of the year. "Creditors analyze a company's balance sheet to determine the likelihood that they will be repaid. They carefully evaluate the nature of the company's assets and liabilities"(Kimmel, Weygandt, & Kieso, pg.15).
Income statement is to assist the company's to know if they will succeed or failure for a particular phase in their operations. It gives a detail report the revenues and past expense which causes a current profit or loss and can point out what improvement is needed. Unlike balance sheet, income statements portray what has occurs over a month, quater, or year. The basic equation is Income=revenue - expenses, and demonstrates any change for good or bad in the owner equity. Investor use the income state for future prediction of the net income.
Retained earnings statements
A retained earnings statement is defined "the amount and causes of changes in retained earnings during the period. The time period is the same as that covered by the income statement." (Kimmel, Weygandt,... [continues]
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