Accounting - Financial Statement Differentiation
Financial Statement Differentiation There are four different types of financial statements; they are balance sheets, income statements, retained earnings statements, and statements of cash flows. Each of these financial statements are important to investors, creditors, and management in various ways. This paper will provide further insight into these financial statements as well as explore, which of these would be of interest to investors, creditors, and management. Financial Statements
Balance Sheet The balance sheet, according to Kimmel (2009), reports assets and claims to assets at a specific time. Assets are things that a company owns that have value, liabilities are amounts of money that a company owes to others, and stockholders’ equity the money that would be left if a company sold its assets and paid off all of its liabilities. Essentially the balance shows the supplies on hand at the end of the year and the total debts outstanding at the end of a period.
Income Statement The income statement reports the success or failure of the company’s operations for a time (Kimmel, 2009). An income statement also shows the costs and expenses associated with earning that revenue. This shows how much the company earned or lost over the period (Beginners ' Guide to Financial Statements, 2007). Most important, it outlines the revenue generated during the period is examined.
Retained Earnings Statement The retained earnings statement, according to Kimmel (2009), shows the amounts and causes of changes in retained earnings during the period. The period is the same as that covered by the income statement. According to Investopedia (2011), the statement of retained earnings reconciles the beginning and ending retained earnings for the period, using information such as net income from the other financial statements.
Statement of Cash Flow The primary purpose of a statement of cash flow is to provide financial information about the cash
Balance Sheet The balance sheet, according to Kimmel (2009), reports assets and claims to assets at a specific time. Assets are things that a company owns that have value, liabilities are amounts of money that a company owes to others, and stockholders’ equity the money that would be left if a company sold its assets and paid off all of its liabilities. Essentially the balance shows the supplies on hand at the end of the year and the total debts outstanding at the end of a period.
Income Statement The income statement reports the success or failure of the company’s operations for a time (Kimmel, 2009). An income statement also shows the costs and expenses associated with earning that revenue. This shows how much the company earned or lost over the period (Beginners ' Guide to Financial Statements, 2007). Most important, it outlines the revenue generated during the period is examined.
Retained Earnings Statement The retained earnings statement, according to Kimmel (2009), shows the amounts and causes of changes in retained earnings during the period. The period is the same as that covered by the income statement. According to Investopedia (2011), the statement of retained earnings reconciles the beginning and ending retained earnings for the period, using information such as net income from the other financial statements.
Statement of Cash Flow The primary purpose of a statement of cash flow is to provide financial information about the cash
References: Beginners ' Guide to Financial Statements. (2007). Retrieved from http://www.sec.gov/investor/pubs/begfinstmtguide.htm Investopedia. (2011). Retrieved from http://www.investopedia.com/terms/s/statement-of-retained-earnings.asp#axzz1gvGPnGBJ Kimmel, P. D. (2009). Accounting: Tools for Business Decision Making. : John Wiley & Sons, Inc.