Interrelation And Usefulness Of Financial Statements Essay

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Register to read the introduction… 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 statement, called a statement of shareholders’ equity, displays changes in the interests of the company’s shareholders over time (U.S. Securities and Exchange Commission, n.d.).

Interrelation and Usefulness of Financial Statements
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Income statements, retained earnings statements, balance sheets, and statements of cash flow are all interrelated. Each statement provides relevant financial data for internal and external users (Weygandt, Kimmel, & Kieso, 2008). In addition, explanatory notes and supporting schedules are a critical part of every set of financial statements (Weygandt, Kimmel, & Kieso, 2008). First of all, net income is computed first and is needed to determine the ending balance in retained earnings (Weygandt, Kimmel, & Kieso, 2008). Secondly, the ending balance in retained earnings is needed in preparing the balance sheet (Weygandt, Kimmel, & Kieso, 2008). Thirdly, the cash shown on the balance sheet is needed in preparing the statement of cash flows (Weygandt, Kimmel, & Kieso, 2008). This is useful to managers, investors, creditors, and employees because it pulls together and summarizes the financial data to produce financial reports, such as a balance sheets and income statements for their organization (Walden University,

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