May 31, 2011
Accounting defines as a systematic report and analysis of an organization’s financial transactions. Accounting provides organizations the insight into understanding its finances and assisting the organization in budgeting, spending, and decision-making. Examples of people who use accounting for business purposes are managers, investors, creditors, and employees. In this paper the subject will explain how accounting is useful to these people. Also in this paper the subject will identify the four basic financial statements of accounting and explain how they relate to one another.
According to Weygandt (2008), “The purpose of accounting is to identify, record, and communicate the economic events of an organization to interested users.” The organization identifies the events within the company and records the events. The recording provides financial activities through the period of the event. The organization communicates the events to the interested parties.
The first of the financial statement of accounting is income statement. The income statement provides the revenue and expense for period (Weygandt, 2008). The statement also informs the company of a net income or a net loss.
Second is the balance sheet statement of accounting. Weygandt (2008) states, “The balance sheet reports assets, liabilities, and stockholder’s equity of a company at a specific date.” On the balance sheet, the total assets have to equal the same as liabilities and the stockholder’s equity....