The Main Components Of Financial Statements And The Processes Used By A Large Company

In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial

The main purpose of the financial statements is to provide creditors and investors with a summary of a business financial activity. All statements are prepared at certain times throughout the year. The balance sheet reports liabilities, assets, and owner equity of the company. The income statement matches incurred expenses during a period of generated revenue. The statement of retained earnings reports retained earnings from net loss and net incomes from

The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.

Financial statements provide financial decision makers with varied information presented in specific formats that is easily attainable tools to evaluate financial health. Three of the necessary financial statements are the statement of financial position or the balance sheet, operating statement also called income statement, and the statement of cash flows (Finkler, Jones, and Kovner, 2013).

Understanding the finances of a company is important but knowing the significance of the financial statements is crucial to the operations as well. Reviewing the statement of financial position, operating statement and statement of cash flows serve as a guidance to management and executives on the day-to-day activities of an organization (Finkler et al., 2013). For example, the statement of financial position (balance sheet) shows the assets and

These adjustments are necessary to reflect actual circumstances that apply to specific projects, work units, the organisation as a whole and the broader economic and financial climate. Within an organisation, there is generally a senior management group or committee responsible for ensuring the financial statements present a full and accurate position of the organisation’s financial situation and that any variants from budget are fully explained. When creating financial reports, depending on the level of detail the organisation requires, the following sources may need to be analysed:

List four basic financial statement analysis procedures, describe how you would calculate each procedure and discuss why you would use each procedure. Based on your reading and outside research, please communicate your own understanding of the requirements. Citations and references are required.

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

Accountants, business owners, investors, creditors and employees use four basic financial statements of an organization to determine the financial well-being and future earnings potential of that organization. Financial statements are a key tool in seeing and understanding the past, present and future condition of an organization. What are these financial statements and what do they mean to the reader? Do the financial statements mean something completely different to an investor, creditor, and employee?

According to our textbook, Fundamental of Advanced Accounting, it states that when financial statements represent more than one corporation, we refer to them as consolidated financial statements. So how does consolidated financial statements play a role in corporations? What are the reasons and benefits for the consolidation of financial statements? What are the steps that are necessary to ensure the proper accounting? What are a few excerpts from Accounting Standards Codification? Thus, these are a few of various questions that are asked in order to further understand Consolidated Financial statements.

Likewise, from the IFRS (2014), prudence concept basically is how to make appropriate judgements for the estimations that required under the uncertainties events such as the payable of doubtful receivables. Transactions from the financial statements should not focus only on the past events. In fact, under the prudence and accrual concept, the company must take into account of the prospective disbursements, especially in the earnings and costs (Dick and Missionier-Piera, 2010). Additionally, prudence concept proposes that the information in the

This essay will begin to look at the main financial statements used by decision makers in businesses today. This essay will go into detail about the income statement and statement of financial position and whether these two statements provide decision makers with their financial information adequately. This essay will also include the various advantages and disadvantages of each financial statement as well as describing whom the decision makers are and why financial statements are important to them. A conclusion will be present at the end of this essay to demonstrate an overall view of whether financial statements are beneficial to decision makers.

The purpose of the income statement (profit and loss or P&L) is to analyze the business or the company’s revenue and expense during certain period of time. This period could be monthly, quarterly or yearly based on the company’s need. There are several uses for the P&L statement. First, Investors can use the income statement to determine the risk of investing in a company after comparing the trend of the P&L for different periods. Second, Business owners and managers are able to analyze the company’s profitability by looking at the revenue and expense break down by account and determine if the cost is too high or workable. Third, P&L indicates the Revenues and expenses related to operation cost and non-operation cost, for example a clothing company for making sport cloth, the operating expense could be anything related to cost of goods directly to make the cloth, any expenses that is not related directly to making the cloth as

Financial statements (or reports) are extremely important for a company, and these statements need to be kept on hand to have financial information readily available to show the company’s overall financial status for each time period. A financial statement is a brief summary of the current or previous financial position and performance of a company (Kumar, 2011). The financial report is prepared to give an overall understanding of the financial status of a company without having to check through all of the company’s receipts of transactions. The four main financial statements are the balance sheet, income statement, statement of retained earnings (owner’s equity), and the statement of cash flows (Four, 2015).

The prudence concept can sometimes be overused in the preparation of financial reports. The implication of this is that it prevents the ability in trying new things as preparers of financial statement becomes overly cautious and do not create room for risk and spontaneity.