Financial Statements Essay
July 23, 2011
Cary Schulz, Facilitator Financial Statements Accounting is a critical aspect of any organization; without accounting a business will not be successful. This paper will inform one of the purposes of accounting; the four basic financial statements; how the basic financial statements are interrelated; and why they are useful for managers, investors, creditors, and employees. Accounting is crucial for every business.
Purpose of Accounting
Accounting is the information system that records, identifies, and communicates an organization’s economic events to interested users (Weygandt, Kimmel, & Kieso, 2008). The definition of financial accounting is the field of accounting that treats …show more content…
Four Main Financial Statements
In addition, there are four main financial statements. They are; income statement, retained earnings statement, balance sheet, and statement of cash flows (Weygandt, Kimmel, & Kieso, 2008). The income statement, retained earnings statement, and statement of cash flows are all for a period of time. The balance sheet is for a point in time (Weygandt, Kimmel, & Kieso, 2008). There are also four different forms of financial statements. They are; multiple-step income statement, single-step income statement, classified balance sheet, and determining cost of goods sold under a periodic system (Weygandt, Kimmel, & Kieso, 2008)
First of all, balance sheets show what a company owns and what it owes at any given point in time (U.S. Securities and Exchange Commission, n.d.). Secondly, income statements show how much money a company made and has spent over a certain period of time (U.S. Securities and Exchange Commission, n.d.). Thirdly, cash flow statements show the exchange of money between a company and the outside world over a certain period of time (U.S. Securities and Exchange Commission, n.d.). In addition, the fourth financial