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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, Investors, Creditors, And Employees

910 words - 4 pages

Financial Statements Paper PAGE \* MERGEFORMAT 3
Financial Statements PaperOne of the primary means of measuring success in a business is profit. Accounting provides the means to measure the various factors that affect the finances of a business by identifying, recording, and communicating economic events that affect a company (Weygandt, 2008). Because various factors can influence an organization's financial situation, the role of accounting is vital in which these three activities are conducted.Four Basic Financial StatementsThe four basic financial statements are: income statement, retained earnings statement, balance sheet, and statement of cash flows. Companies typically produce ...view middle of the document...

In addition, the previous retained earnings that are added to the net income and dividends deducted from the total to give the current retained earnings are included. If the dividends are more than the previous sub-total of the previous retained earnings and net income, than the result is a loss for the company. A net profit is reflected if the sub-total of the previous retained earnings and net income exceeds the dividends.Reporting a company's assets, liabilities, and stockholders' equity on a specific date is indicated on the balance sheet (Weygandt, 2008). Part of the stockholders' equity is the retained earnings derived from the retained earnings statement, which in conjunction with the value of the common stock held by the stockholders provides the value for stockholders' equity (Lewis, 2009). Assets include the cash and cash-like mediums such as bonds, certificates, or other documents that can be easily converted to cash available to the company. Other assets include accounts receivable, equipment, supplies, and real property owned by the company. Liabilities are the monies owed by the company such as accounts payable and any outflow of cash that supports the company and its employees.The statement of cash flows provides a rundown between the inflow (receipts) and outflow (payments) of cash during the indicated date range (Weygandt, 2008). This statement presents a broad overview of how much cash came in and went out based upon the information contained in the summary of accounts during a specific period. At the end of the reported time period, the cash remaining equates to the cash on the balance sheet listed as an asset on the balance sheet.The purpose of...

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