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Financial Statements Essay

751 words - 4 pages

Accounting is essential in every business entity and serves a purpose to all internal and external users. Several business entities use financial statements to make the most efficient, economic decisions and to maintain a balance in the organization. For business entities, financial statements are the snapshots of the business. The financial statements purpose is to summarize and interpret the financial aspect of a business entity for internal users such as managers, marketing professionals, production supervisors, finance directors and company officers to make informed management decisions. For external users the financial statements benefit users such as owners, stockholders, creditors ...view middle of the document...

Income statements present a summary of revenue gains, expenses, profit and losses, and net income or net loss of equity for a particular period. This statement shows how the business is running financially and performing for a period time. Illustrated below is an example of what an income statement looks like. The income statement reflects its revenues and expenses and broken down into further detail by commodities.
Illustration of Income statement

A cash flow statement is a financial report that describes the sources of a company's cash and how that cash was spent over a specified time period. It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills (Hillstrom, 2002). Cash flow statements are the business cash receipts and cash payments relating to its operating, investing, and financial activities during a particular time. The type of classification for cash receipts is the money put together by business owners to start a business. Another type of cash receipt standard is reporting the investments owners put into running a business, such as equipment, furniture, computers, and what makes the operation of the business run. The operating receipts are monthly expenses, such as paying rent, taxes, and utilities to maintain the business operation. The cash...

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