Acc 561 Financial Statements Differential

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Financial Statement Differentiation Paper
Jasmine Unger
April 8, 2013
Professor Timothy Jared

Financial Statement Differentiation Paper
Financial statements provide documentation of a company’s financial history for a set timeframe. One of the financial statement used by investors, creditors, and mangers is the balance sheet. The second statement used by accountant’s income statement, which is also important to shareholders. The third statement is the retained earnings statement, and the fourth financial statement is the statement of cash flows. Each financial statement has a different purpose and shows different aspects of the company’s finances. However, these financial statements are integrated and work together to
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Financial Statement for Creditors
The financial statement most useful to creditors is the income statement. The income statement is used to determine future earnings, and determining future earnings is important to creditors to see if the company can repay the debt in the future. Creditors do not loan money to businesses or individuals if the money cannot be repaid. The income statement is the best financial statement source for a creditor to predict repayment and how much profit would come from this repayment.

Financial Statement for Managers
The financial statement mostly used by managers within an organization is the balance sheet. The balance sheet lays out all of the company’s assets and liabilities at a certain point in time (Chron, 2013). Management can determine the company’s available cash and if adjustments are needed to the business practices. The balance sheet simply shows the difference between the company’s assets and liabilities, which equals the net worth of the business. Managers must review the balance sheet to determine how the company can repay creditors, finance operations, and if purchases can be made at that time.
The four financial statements used by accountants are the balance sheet, income statement, retained earnings statement, and the statement of cash flows. Each of the financial statements are important for the company to provide an accurate record of financial reporting
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