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Financial Statements Paper

Essay by   •  February 13, 2013  •  Term Paper  •  749 Words (3 Pages)  •  1,233 Views

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Financial Statements Paper

"Accountancy is the process of communicating financial information about a business

entity to users such as shareholders and managers" (Elliot & Elliot, 2012). Accounting defines

an art that summarizes in a substantial way the financial business world's relations and measures

in reference to money.

According to the U.S. Securities and Exchange Commission and the U.S. Generally

Accepted Accounting Principles, communal businesses are required to file four different

financial statements on a quarterly or yearly basis. These financial statements consist of a

balance sheet, an income statement, a cash flow statement sheet and a statement of owner's

equity sheet. These financial statements are essential to specified financial reporting and

recording.

Balance Sheet

A balance sheet gives a general representation of a company's financial position by showing the total resources of a business. This includes accountabilities plus equity. "Current assets can include cash, accounts receivable, inventory and prepayments for insurance. Fixed assets can include property and the depreciation of property" (Hamilton, 2010).

Income Statement

Income statements show the net income of the business after paying out expenditures, which can include product procurement, earnings, marketing, taxes and investment losses.

Cash Flow Statement

A cash flow statement displays the total of growth or decline in cash that the company has on hand every quarter. Companies report their cash flow from functioning events, "including the purchase or sale of capital equipment and property; and financing activities, including the sale of stocks and bonds or taking out a loan from a lender" (Hamilton, 2010).

Equity Statement

Businesses usually include a statement of proprietor's equity into their balance sheet. This includes a distinct equity report that shows the equity of stockholders or owners at the end of a fiscal period, "which includes the value of each share plus gains or minus losses and the withdrawal of or addition to company funds on the part of owners and shareholders" (Hamilton, 2010).

Internal and External Users

A financial statement's information supports a business to make better economic decisions. Employers and consumers who rely on financial data may be both internal and external to the business.

Internal

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