* Financial Statements
* To make sound business decisions, accurate financial information is necessary accounting identifies, records, and communicates the financial events of an organization in a manner that can be useful to interested users. These events such as financing, investing, and operating activities are recorded in financial statements. The four basic financial statements are the income statement, the retained earnings statement, the balance sheet, and statement of cash flows. Each of these statements provides specific information about an organization for a specific period of time for different users such as management, investors, creditors, and government entities (Kimmel, P. D., Weygandt, J. J., & Kieso, D. E., 2011). *
* The first of these financial statements is the income statement which reports the success or failure of the company's operations for a period of time. It also reports the revenues and expenses a company occurs during a specific time period. The income statement lists the company's revenues followed by its expenses. Looking at a company’s revenue versus its expenses will show either a net income or a net loss. If the statement shows a net income then the revenues exceeds expenses and net loss results when revenue is less than expenditures. These results may be interpreted as a period of financial success or failure for the company. The internal users, such as managers, production supervisors, and other company employees will look at the income statement and review the amount of money spent during a specified time period on operational activities like employee salaries, supplies, materials, and other operating expenses. External users, such as investors, creditors, and taxing agencies use an income statement to examine the financial patterns for success and failures. *
* The retained earnings statement shows the...