Week 1 - Financial Statements

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Financial Statement Differentiation
Deborah Rivera
ACC/561
April 8, 2013
Dr. James Sullivan

Financial Statements
Four basic financial statements are created for use by investors, creditors and management to record how a profit-making organization has used funds during a specific period. The most widely used statements are the balance sheet, income statement, statement of cash flow and statement of retained earnings. All financial statements are presented in a structured fashion in which different revenues and expenses are added and subtracted, to reveal ultimately a company’s financial standing. Financial statements will be clearly marked at the top page of each report with the name of the entity, title of the statement, the accounting period and the unit of measure. Balance sheet

A balance sheet is a financial statement that summarized a company’s assets, owner’s equity and liabilities. It can be said that a balance sheet provides a quick look into the financial health of a company. A balance sheet is useful to management and creditors. Balance Sheet Structure

Assets
* Cash
* Inventories
* Plans and equipment
* Land
* Total assets
Liabilities
* Account payable
* Notes payable
* Total liabilities
Owner’s Equity
* Contributed capital
* Retained earnings
* Total stockholder’s equity
* Total liabilities and stockholder’s equity

Income statement
Also known as the “profit and loss statement”, the income statement is a record of the profits and losses of a business, usually over the course of one year. The equation can be illustrated as Revenue – Expenses = Net Income. The income statement provides the owner or shareholder a look into its performance and the profitability of the company. It helps to determines if a company is able to maintain profit quality, that is to say, if the profit made is sustainable. It is also used for benchmarking practices. In conjunction with the cash flow...
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