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The Four Financial Statements Essay

798 words - 4 pages

The Four Financial Statements
Daniel K. Lollis
August 3, 2012
Sima Jalilizeinali

The Four Financial Statements
The four financial statements are formal records of the activities of a company, person or business entity.  The four financial statements are balance sheets, income statement, statement of owner’s equity, and statement of cash flow. This paper will identify the four basic financial statements and describe the purpose for each.
The balance sheet reports assets and claims to assets at a specific point in time is a statement of financial position at a given point in time (Kimmel, Chapter 1, Balance Statement, 2009). The fundamental accounting model is ...view middle of the document...

The income statement should help investors and creditors determine the past financial performance of the company. It should also help predict the future performance and assess the capability of generating future cash flows through report of the income and expenses. People who invest in the stock market have become very familiar with the income statements of the company’s that they are buying stocks in. If a company has a huge income statement more people are likely to buy their stocks over a company who has a poor income statement that does not show any growth.
The statement of owner’s equity details the changes to the owner’s equity account during the accounting period as the organization issues dividend payments and retains money for use within the organization for investment (Fuentes, 1999-2012). The statement of owners’ equity is simply explained as you have to reconcile the previous equity balance with withdrawals or payments, investments and income of the current period and then you get the owner’s current statement of equity (Fuentes, 1999-2012). This report is a valuable tool also to see if a company is moving in the right direction and if you want to invest money in that company.
The statement of cash flow is to provide financial information about the cash receipts and cash payments of a business for a specific period of time (Kimmel, Chapter 1, Income Statement, 2009). If you are an investor the...

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