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Financial Statement Diferentiation Essay

658 words - 3 pages

Financial Statement Differentiation
ACC/561

Financial Statement Differentiation
There are four different kinds of financial statements. These include the income statement, the statement of cash flow, the balance sheet, and the retained earnings statement. Each statement has a different focus and are used by investors, managers, and creditors to help make decisions about a business. Knowing which statements need to be used and when will help make any business more aware of where their funds are going.
The Income Statement
“An income statement is a financial statement that measures a company’s financial performance” (Investopia, 2015). The income statement will usually cover a precise ...view middle of the document...

The areas covered in the balance sheet give investors an idea of what a company may owns, what a company owes, and the sum invested by the shareholders” ("Investopia", 2015). It is called a balance sheet because both sides must balance with the other; “Assets = Liabilities + Shareholders' Equity” (Accounting Tools, 2015). Balance sheets are also used by creditors to determine loan eligibility, and management to help make large or small business decisions. Balance sheets are an important source of information for any business and is a key tool to help make financial business decisions.
The Retained Earnings Statement
The retained earnings statement indicates the variations of “the retained earnings accounting during a specific period, usually the same period covered by the income statement” (Accounting Tools, 2015). The statement shows the starting balance of the retained earnings account, and then adds the net income and subtracts the dividends, which then leaves the ending retained earnings balance. “(Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings),” (Accounting Tools, 2015). Retained...

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