How The Structure And Uses Of An Income Statement, Balance Sheet, And Statement Of Cash Flows

808 Words Nov 9th, 2015 4 Pages
Introduction Financial Statements are essential to any business. It is through the financial statements that a company’s owners, lenders, shareholders, and general stakeholders are able to track a company’s performance as well as make business decisions. Each financial statement has its own unique purpose and components. This paper will explore the structure and uses of an income statement, balance sheet, and statement of cash flows.
Income Statement An income statement is shows a business’ revenues, expenses, and profits or losses over a given period of time. Revenues are derived from any money received from any goods sold or services performed by a company. There are multiple types of expenses a business can incur. Costs of Goods Sold include costs that are directly related to production such as labor and materials. Operating expenses also make up a significant portion of a business’ expenses. Operating expenses include expenses such as research and development, marketing, and amortization of intangible assets such as patents or goodwill. Another significant expense for a company is depreciation expense. Depreciation expense is incurred as a capital asset such a building or piece of equipment is expensed over a period of years. Revenue minus expenses equals a business’ profits or losses (Faulkenbery, 2012). Using the detail of an income statement a company’s owners, lenders, shareholders, and investors are able to review the details of how a company makes and spends its…

Related Documents