This website uses cookies to ensure you have the best experience. Learn more

Financial Statements Overview Essay

1026 words - 5 pages

Financial Statements
Dave Hall
ACC/290
Lisa Henderson
September 16, 2013
Financial Statements
  In any business, the financial statements are the backbone of the financial accounting reporting within the business. The four financial statements include the income statement, balance sheet, retained earnings statement and the statement of cash flows (Kimmel, Weygandt & Kieso, 2010). These four statements provide a summary picture of the overall financial health of the company, for the period of time reported, to both internal (managers and employees) and external customers (investors and creditors). The internal and external customers can use the company’s reported financial ...view middle of the document...

Creditors use the income statement to predict future earnings of a company, as this is useful in making a decision to loan a company money or offer a line of credit (Kimmel, Weygandt & Kieso, 2010). The net income will help determine the amount of a loan or credit line that a company is given.
The example below illustrates the data shown on an income statement (Kimmel, Weygandt & Kieso, 2010).
[pic]

Balance Sheet
The balance sheet is a detailed snapshot that reports a company’s financial health at a specific point in time (as noted in the header of the balance sheet). The details within the balance sheet are the assets (cash, accounts receivable, owned equipment, and prepaid insurance) and the liabilities and stockholders’ equity (liabilities include notes and accounts payable, salaries, unearned revenue, interest payable, and stockholders’ equity which includes common stock and retained earnings) of the company (Kimmel, Weygandt & Kieso, 2010). The liabilities are claims of creditors, while the stockholders’ equity are claims of owners (Kimmel, Weygandt & Kieso, 2010). The total amount of assets must equal the total amount of liabilities and stockholders’ equity. The example below illustrates the data shown on a balance sheet (Kimmel, Weygandt & Kieso, 2010).
[pic]
Managers and employees utilize the balance sheet for two puposes; the first is to determine whether the amount of cash retained to meet the company’s daily cash needs, the second purpose is to evaluate the relationship between the company’s debt and the amount of stockholders’ equity to ensure that there is a satisfactory proportion of debt and common stock financing (Kimmel, Weygandt & Kieso, 2010).
Retained Earnings Statement
The retained earnings statement reflects how much net income is retained by a company. This statement is particularly important for a company as the information helps management determine the amount of cash available for further expansion of the company. On the retained earnings statement, dividends paid are subtracted from the net income listed in the income statement, thus totaling the retained earnings for the period listed in the header of the retained earnings statement (Kimmel, Weygandt & Kieso, 2010). For a company that does not pay dividends, the retained earnings would equal the net income listed on the income statement.
For a company that offers stock...

Other Papers Like Financial Statements Overview

Beaformativegroup Essay

668 words - 3 pages and Vertical Analyses. V. Conclusions * Overview of Performance; * Implications for Potential Investment; * Limitations of the Analysis, Ratios and Financial Statements (e.g. the potential problems associated with using ratio analysis to analyse the financial health and performance of companies, balance sheet figures are single-point values, similar companies for comparison are hard to find, accounting policies may differ between

Finincial Accounting Essay

2520 words - 11 pages assess the accountability of management which may influence the users' decision making process. Information on financial position is primarily provided in a balance sheet, that of performance in the income statement and changes in financial position through the presentation of a cash flow statement (IAS 7). The statements should be viewed as a whole, for example an income statement provides an overview of performance which is incomplete without

Analysis

2052 words - 9 pages financial operations of the company in • terms of liquidity, solvency, turnover, profitability etc. • To find out the reasons for unsatisfactory results. Theoretical overview of Financial Statement Analysis • Financial Statement: An organization communicates its financial information to the users through financial statements and reports. Financial statements contain summarized information of the organization’s financial

Financial Statements Paper Define The Purpose Of Accounting And Identify The Four Basic Financial Statements. Explain How They Are Interrelated With Each Other, And Why They Are Useful To Managers,...

910 words - 4 pages successful, it must be profitable and competitive in its space. To achieve this, accounting plays a necessary and integral part. An organization's players must possess a firm understanding of the financial status of the company through its accounting practices. The four basic financial statements give an overview of the information with the intention of management, oversight, auditing, compliance, and reporting to interested internal and external

An Offer You Can’t Refuse

581 words - 3 pages related to the case. * The company’s auditor issued a standard unqualified opinion on Fast Eddie’s 2006 Financial Statements with no liability accrued. * In 2006, the company immediately began an internal investigation. * Fast Eddie dismissed Sweet Lou because of his allegations of defective pricing. * As of March 31, 2007, the government had not filed any charges or specified a monetary penalty against Fast Eddie. * In

Syllabus 405

2234 words - 9 pages Course Design Guide HCS/405 Version 5 1 Course Design Guide College of Natural Sciences HCS/405 Version 5 Health Care Financial Accounting Copyright © 2012, 2010, 2007, 2005, 2004, 2002, 1999 by University of Phoenix. All rights reserved. Course Description This course provides an understanding of the general principles of accounting applied in the health care environment. It includes an overview of sources of revenue for various

Health Care Case Study: Financial Statements

775 words - 4 pages what is shown on Patton-Fuller’s report. This hospital’s statement is grouped as an overview of the operations revenues and expenses. Conclusion A review of the Patton Fuller Community Hospital financial statements and annual report shows the audited and unaudited financial statements differ. The financial ratios for the hospital were not improving. The relationship between revenue sources and expenses on Patton-Fuller’s financial performance and the effect of revenue sources on financial reporting can be surmised by examination of the reports. Lastly, one can surmise the method of grouping the hospital’s revenues and expenses for planning and control.

Financial Statements Paper Part I

1680 words - 7 pages  Financial Statements Paper Part I Debbie Melvin ACC 497/Professor Michael Morris December 1, 2014 Financial Statements Paper Part I Introduction Three of the most important financial statements are the income statement, the balance sheet, and the statement of cash flows. These statements can all provide some much needed information for the business and its investors and creditors. A business

Financial Statment

601 words - 3 pages receivable, inventory, prepaid expenses, investments and anything that can be considered a debt. The company can see their profits and losses from each accounting period throughout the year. At the end of each year this will give a company an overview of all financial gains and losses for certain time periods. The comparative statements will help a company predict its future and help them make smart financial decisions for positive financial outcome

Annual Report

1187 words - 5 pages its responsibility for financial reporting, and describes efforts made to comply with requirements. -Report of Independent Registered Public Accounting Firm (pages 46 and 79): To be considered reliable, the company must provide certifications that its financial statements are accurate. Financial statements have to be reviewed and audited for accuracy by a qualified Certified Public Accountant (CPA). In these letters, The CPA Firm of Ernst &amp

ACCT 504 Accounting and Finance Managerial Use and Analysis

1091 words - 5 pages ACCT 504 Accounting and Finance Managerial Use and Analysis Follow Link Below To Get Tutorial homeworklance.us/downloads/acct-504-accounting-finance-managerial-use-analysis/ Description: ACCT 504 Week 1 , An Overview of Financial Statements and the Environment of Financial Reporting What is GAAP? What is the purpose of GAAP? What is the purpose of a Balance Sheet? What information does it provide? ACCT 504 Week 2, The

Related Essays

Understanding Accounting And Financial Information Essay

603 words - 3 pages Understanding Accounting and Financial Information A company’s financial status provides various financial information that investors and creditors used to evaluate a company’s financial performance. The financial statement perspectives provided in this overview are meant to give readers the big picture. With these considerations in mind, beginning investors should be better prepared to cope with learning the analytical details of

Fianacial Statement Analysis

982 words - 4 pages Introduction- What is a financial statement analysis: Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital

Financial Management Essay

575 words - 3 pages ) Retrieved August 20, 2014 from: http://www.accountingcoach.com/balance-sheet/explanation/3 Boundless.com (n.d.). Uses of the Balance Sheet Retrieved August 20, 2014 from: https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/financial-statements-overview-3/the-balance-sheet-25/uses-of-the-balance-sheet-159-6010/ Find an accountant (2014). GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (G.A.A.P) Retrieved August 20, 2014 from

Accounting Essay

1310 words - 6 pages statements prepared for a period of one year are called annual financial statements and are required to be audited by an auditor (a chartered accountant or a certified public accountant). Annual financial statements are normally published in an annual report which also includes a directors' report (also called management discussion and analysis) and an overview of the company, its operations and past performance. Income statement communicates the