FINANCIAL STATEMENTS | Analyzing and Interpreting Financial Statements

3292 WordsMay 17, 201314 Pages
| FINANCIAL STATEMENTS | Analyzing and Interpreting Financial Statements | | This paper will demonstrate my understanding of financial accounting and why generally accepted accounting principles (GAAP) are important. I will discuss how financial statements are used in the marketplace. I will describe each financial statement and tell what it reveals about the business. I will explain how the statements are linked and show examples. I will explain the notes to the financial statements. I will also explain why ratios are used and why they are important. | Keiser UniversityDr. Bunney SchmidtACG 501 | Monica Holmes | 4/14/2013 | INTRODUCTION Financial statements are the output of the accounting cycle. Financial…show more content…
Berry also stated, “That corporate owners ' equity statements go into detail about stock sales, retained earnings and long term investments held by the company” (Berry, 2006). Financial statements also investigate into pension liabilities and capital gains/losses on liquid investments (Berry, 2006). Berry stated “small business owners ' equity statements are much less complicated than their corporate counterparts” (Berry, 2006). According to Berry (2006), a statement for a small business can detail any changes in the balance of cash accounts on which company owners have the right to withdrawal, showing the net increase or decrease in the balance for the period in question (Berry, 2006). Statement of Cash Flow Kramer talked about the statement of cash flows and how they serve as much the same purpose as the income statement, with the major difference being the cash flow statement 's exclusion of non-cash income and expenses (Kramer, Johnson, 2009). According to Kramer and Johnson (2009), accountants commonly begin with the net income figure from the income statement when developing a statement of cash flows. According to Kramer, and Johnson (2009), accountants adjust net income by adding back non-cash expenses and subtracting non-cash income, arriving at a net increase or decrease in cash. Kramer and Johnson stated

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