Financial Statements Paper

665 words - 3 pages

Financial Statements Paper

Accounting information consists several areas of interest for users looking to interact with a business. These areas include assets, liabilities, expenses and revenues. The information reflecting these areas of interest is used to populate financial statements. The backbone of financial accounting is made up of four basic financial statements. These four financial statements are a balance sheet, an income statement, a retained earnings statement, and a statement of cash flows. Users utilize these basic forms to keep track of financial areas of interest in a business such and to make decisions.

The balance sheet is used to paint a current picture of what ...view middle of the document...

These decisions range from whether or not to give its employees a pay raise, or determining how much the business is going to sell its product for. Financial comparisons of operating alternatives and projections of income from new sales campaigns are also provided in addition to the four basic financial statements. Employees use these statements to see exactly where the business stands in terms of its production. These basic financial statements also assist in showing areas of improvement.

The external users who utilize these basic financial statements consist of users such as investors or owners, and creditors or suppliers and/or bankers. Investors (owners), use these basic financial statements to make various decisions such as buying, holding, or selling stock owned in a business. Creditors (suppliers and/or bankers), also use the information provided by the basic financial statements to evaluate the risk involved with selling on credit to a business, and lending monies respectively.

Investors also utilize these basic financial statements to see how well a...

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