Finaces Statements

In: Business and Management

Submitted By knaccar
Words 728
Pages 3
Finance Statements Paper
Kimberly Nelson
ACC/290
06/12/2012
David Schwanke

Finance Statements Paper
When preparing financial statements for a company it is important to recognize the four basic financial statements and to understand the purpose of each statement and how it may affect internal and external users. This paper will cover each statement in sequential order and will discuss how the statements are useful to internal and external users.
Income Statement- The income statement lists the company's revenues followed by its expenses. The final numbers from this calculation will indicate net profit or loss. The success or failure of the company's operations for a period of time is derived from this calculation. Managers use the income statement as a means to determine if the companies’ operations are profitable. The income statement reports on the success or failure of the company’s operations by reporting its revenue and expenses. Adjustment to its operations may need to take place internally to continue profitability. Investors are interested in past net income because it provides useful information for predicting future net income. Creditors also use the income statement to predict future earnings.
Retained Earnings Statement- The retained earnings statement shows the net income retained in the corporation. The time period covering the retained earnings is the same time period of the income statement. That time period can be represented monthly, quarterly, semiannually, or annually. The beginning retained earnings amount appears on the first line of the statement which is derived from the Income Statement. Then the company adds net income and deducts dividends to determine the retained earnings at the end of the period. By monitoring the retained earnings statement, financial statement users can evaluate dividend payment practices. Some…...

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