Financial Statement Differentiation Paper
ACC/561 Accounting
October 4, 2011
Financial Statement Differentiation Paper
Often times, in business, one needs to have different financial statements to show specific information at different periods of time. These financial statements are essential to the success of a business. These statements include: balance sheet, income statement, statement of retained earnings, and statement of cash flows. These statements will be discussed in this paper, so that one could have a better understanding of the things that takes place in the business world.
Balance Sheet
The first financial statement to be discussed is the balance sheet. A balance sheet is considered to be a statement of financial position at a given point in time (QuickMBA, 2010). Usually an organization’s balance sheet is set up is set-up according to the equation assets = total liabilities + shareholder’s equity. On the right side of the company’s balance sheet, the liabilities and shareholder’s equities are listed. On the left side of the balance sheet the company lists its assets. The Beginners’ Guide to Financial Statements states, “A balance sheet shows a snapshot of a company’s assets, liabilities, and shareholders’ equity at the end of the reporting period” (2007).
Income Statements
The next financial statement that is to be discussed is the income statement. The income statement simply shows the total profits minus any expenses a company may have for a given time period that ends at a specific date. Income also reports earnings per share. This tells how much money shareholders can collect if the company chose to distribute all of the net earnings for the period. Income statements are usually set-up like steps. At the top it begins with the total amount of sales made during the accounting period. When one goes to the next step, a deduction is made for certain costs or other operating expenses. Income statements...