Financial Statements Paper

Finance can be organized in many ways depending on one’s purpose. The most commonly used and much preferred are thru statements. There are four financial statements and they are: income statements, retained earnings statement, balance sheet, and statement of cash flows. Each of these four has their own purposes to help the individual or a company in keep track of their financial records as well as their earnings and losses. For an individual some of these statements are usually sent to them via their bank or credit union and they can also be requested if need be.

Income statements are reports that tells the company’s revenues and expenses, in other words a company’s success or failure in a given time period. It usually states a company’s revenues followed by their expenses. Retained earnings statement is the company’s net income that they retained. This is when the company decides what portion of the profits they are going to pay to the shareholders in dividends. Balance sheets reports the assets and claims to assets at a certain point in time. This is divided into two categories which are claims of creditors and claims of owners. Claims of creditors are called liabilities and claims of owners are called stockholders equity. Statement of cash flows provides the financial information the cash receipts and cash payments of a business for a specific time period. It reports the company’s operating investing and financing activities. It also shows the net increase as well as the net decrease in cash during the time period and the amount of cash at the end of the period.

The financial statements are very helpful to managers and employees because they can keep track of all the financial activities of the company. The income statement would be very useful because they can look at what the business made in revenue as well as their losses and make necessary adjustments if the losses are not the acceptable amount that the company wishes to have spent. Retained earnings is important