Financial Statements

Financial Statements

Marcos Ramirez

ACC/290

October 18, 2012

Florentino Lopez

Financial Statements

The four major financial statements in accounting are the: income statement, balance sheet, retained earnings statement, and cash flow statement. The financial statements are prepared in monthly, quarterly, and annually basis by accountants in order to provide a business summary for internal and external users. The income statement states the company's revenues, expenses, and net income. The balance sheet shows the company's assets, liabilities, and stock holders' equity. The retained earnings statement shows the net income, and how the distributions of dividends impact the financial status of the company. The cash flow statements reports the receive and payments of the cash during the accounting period in the categories of investing, operating, and financing.

Income Statement

The income statement shows the company's total revenue, expenses, and most importantly the net income. The revenues are the company's sales of goods or services that have been sold to customers during the accounting period. The expenses are the resources that the company used in order to produce the revenue. The net income is the amount left after all the expenses have been deducted from the revenues. The income statement is important for internal and external users, because it indicates the company's ability to sell goods and services for more than the cost. The net income of a company also gets reported in the balance sheet, as the cash on hand.

Balance Sheet

The balance sheet is like a snapshot of the financial status of a company during an specific period of time. The balance sheet first states the company's assets, which are the economic resources that the company owns. It also states the company's liabilities, which are the company's debts and obligations. Last but not least it states the stockholders equity, which indicates the amount of financing provided by the owners and earnings. This is an important financial statement, because it reports to internal and external users the company's ability to pay for the liabilities.

Retained Earnings Statement

The retained earnings statements shows the way the net income and the distribution of dividends affect the company's financial position. The retained earnings statement shows the net income, minus the dividends paid to stockholders, which results in the company's retained earnings. This statement is