Financial Staterment Differentitation

                                Financial statement differentiation

                                Ann Tracy

                                ACC/561

                                July 13, 2015

                                Tom Myers

                                        Introduction

        There are a lot who use financial statements, such as managers use them to be able to manage the affairs of the business, also shareholders use financial statements to be able to assess the risk and return of their investment in the business, also prospective investors use the financial statement to see if it’s worth investing in a business. Financial institutions use them to see if they will give credit or a loan to a business, suppliers use the financial statement to see if a business has good credit before they give them supplies; customers use a financial statement to see if the supplier will have the resources to keep the supplies coming in. Employees use a financial statement to see business profitability and its consequence for the future, government use financial statements to determine the correctness of tax declared in the returns. So a lot uses for the financial statements these are the statement of cash flow, income statement, a balance sheet a retained earnings statement.

                                        Income statement

        The income statement this is a summary of a company’s profits, loss for any one given period of time. It can be any specific period of time like a month, six months, or even one year or however long or short a business wants it the income statement this records all revenues for a business during that period, also other things like the operating expenses for the business. Revenues are such things as money earned from sales of good or service, also any income earned from interest. Expenses are for things like operating expenses for such things as produce the goods, salaries of personnel, marketing, and interest paid on loans and so on. So the information on an income statement allows the user to make a judgment about a business even if it was just a quick glance.

                                        The retained earnings statement

        A lot of companies prepare income statements, but some also prepare retained earnings statement, this statement knows the changes in retained earnings which happen from one period till the next period. The statement of retained earnings shows the balance at the beginning of the retained earnings, the net income for that period, and also an ending retained earnings balance. The retained earnings statement is really useful to new investors who could look at past retained earnings statements to determine the companies’ dividend payment history.

                                        The balance sheet

According to Kimmel et.al. (2011). “assets must balance with claims to assets” per the basic accounting equation (1) on the balance sheet, this is where the balance sheet gets its name. on the balance sheet, the first sections is assets, these can include such things as supplies, account receivable, cash, equipment, and any other assets a company may have. The second section lists the companies’ liabilities and stockholder’s equity; liabilities are such things like accounts payable, salaries payable, interest payable and other debts. Stockholders equity are such things like claims of investors, for things like common stock, and also retained earnings for the given period as reported on the retained earnings statement.

                                         Statement of cash flow

        The final one is the statement of cash flow, shows their inflows also the outflows of cash that go to and from a business. According to the SEC website (2014) “while an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the business generated cash”. There are three main sections, the operating, investing, financing activities. The operating is for things like services less any payment for operating activities, receipts from sales of good and services, for things like costs of raw materials, cost to manufacture the goods. Investing activities things creates cash flows from purchasing assets needed to run the business, for such things as equipment, furniture, buildings. The financing activities create cash flows from taking out debt as loans and by issuing or repurchasing shares of common stock.