XACC / 290
September 28, 2012
Financial statements are a more common term that is used while referring to statements that are produced for a business at the end of accounting periods. There are four different statements that get produced for a company and they are the balance sheet, income sheet, retained earnings statement, and the statement of cash flow.
A balance sheet will provide a detail of information about the company’s assets, liabilities and shareholders’ equity (Kimmel, Weygandt & Kieso, 2011). Assets are the things that a company owns that may have value. These things can be sold or used by the company to make products they need or help offer a service that can be sold (Kimmel, Weygandt & Kieso, 2011). Assets can be any type of physical property, but it could also be something like trademarks and patents. The liabilities are the total amounts of money that a company owes to someone else. A company’s liabilities can include many types of obligations, like borrowed money from a bank to launch a new product, rent for use of a building, money owed to suppliers for materials, payroll a company owes to its employees, environmental cleanup costs, or taxes owed to the government. Shareholders’ equity is what a company would also call capital or net worth. This is the money that is left if a company sold and paid off everything (Kimmel, Weygandt & Kieso, 2011). This money would belong to the shareholders, or the owners, of the company.
The income sheet is a statement that tells a company how much revenue they have brought in over a period time. This statement will also show costs and expenses associated with earnings of that revenue.
The retained earnings statement is a statement that will show amounts and causes of changes during a time frame. This time frame is the same as the income statement.
The statement of cash flow is a...