Accounting - ACC/561
March 31, 2012
Financial Statement Differentiation Paper
The first issue to discuss is the four different types of financial statements and the use of each that a business will use. The second issue to discuss is what financial statements that an investor will review. The third issue to discuss is what financial statements a creditor will review. The fourth will be what financial statements that management within a company will review.
The first financial statement is the income statement (Kimmel et al, 2009). The income states will show the success or the failure of a company’s operations for a certain period. The income statement will have the revenue the company will make, the expenses the company will spend, and the net income of the difference of each.
The second financial statement is the retained earnings statement (Kimmel et al, 2009). Retained earnings mean the net income that is retained in the corporation. The statement will show the amount and the cause of changes that can occur in the retained earnings during a certain period. The period of both the retained earnings and the income statement have the same period. The information covered on the retained earnings would be the earnings from the month prior, add the net income, minus the dividends, and the outcome for the retained earnings for a certain month.
The next financial statement would be the balance sheet (Kimmel et al, 2009). The use of the balance sheet is so a company can report the assets and the claims to the assets during a certain period. The claims to assets can be from two groups, the first would be the claims to creditors that would be the liabilities and the second would be the claims to owners that would be the stockholders equity. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity. Both sides of this equation must balance...