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Financial Statement Essay

861 words - 4 pages

RUNNING HEAD: FINANCIAL STATEMENTS PAPER

Financial Statements Paper
ACC 290

Financial Statements Paper
In this paper the four basic financial statements will be defined. Each of the four financial statements has its purpose for use. As part of the paper the description of the purpose of the four basic financial statements is acquired. The discussion of the financial statements would be useful to internal and external users is performed as well in this paper.
The four basic financial statements are the balance sheet, income statement, retained earnings statement, and statement of cash flow (Kimmel, Weygandt, Kieso, 2011). The balance sheet is used to present a picture of ...view middle of the document...

The cash receipts and payments shows a business cash position.
Internal users such as managers and employees use financial statements. Internal users use the financial statements to obtain data to use for future budget concerns. The data gives the internal user the previous period revenue and expenses. The revenue and expenses of the previous time will be a prediction of future transactions. The financial statement would be useful to make decisions regarding financial in a future time based on prediction. Internal users can also use financial statements to set performance goals. The internal user will give information from income statements to see where the company needs to increase revenue from a department. The expenses obtain from the income statements can be used to show internal users where cutbacks need to be. Internal users rely on financial statements to direct the company in daily activities.
External users such as investors and creditors uses financial statements. The information obtained from the financial statements are used to make decisions to buy, hold, sell, or lend (Kimmel, Weygandt, Kieso, 2011). Investors use the income statements to review a company's income to predict future income. Investors use the information on potential income so that they know when to buy and sell stock from the company (Kimmel, Weygandt, Kieso, 2011). The creditors use the income statements to analyze the future of the company. The creditors need to make sure a company will be able to back money borrowed. The retained earnings statement is useful to investors and creditors as well. By the investors monitoring retained earnings statements the investor...

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