Financial Statements Paper

Financial Statements Paper

Financial Statements Paper
ACC/290

Financial Statements Paper
Medical doctors have various gadgets and apparatus to help them determine the health condition of their patients. Doctors use thermometers, stethoscopes, and high blood pressure machines to deduce whether a patient is sick or healthy. There are times when perfectly healthy looking individuals are diagnosed with diseases with the help of these instruments to save their lives.   Financial reports perform the same function for companies and corporations. Misrepresentations of financial statements by organizations like Enron have had negative consequences on the U.S economy in recent years. The operating activities and how they make money and repay their debt is reflected in financial statements. The data from financial statement are relevant to internal users such as, accounting managers and employees, and to external users such as investors and creditors.
The primary purpose of the financial statements is to list the assets, liabilities, expenses, and revenues of a company. “Assets are the resources owned by a business. Liabilities are amounts owed to creditors in the form of debt and other obligations. Expenses are the cost of assets consumed or services used in the process of generating revenue. Revenue is the increase in assets resulting from the sale of a product or service in the normal course of business. The four basic financial statements are the balance sheet, income statement, retained earnings statement, and the statement of cash flow” (Kimmel, Weygandt, & Keiso, , 2009).   Each of these statements has a significant role in the determination of the company’s financial standing.
“The balance sheet provides the user with data about available resources as well as the claims to those resources” (Best, 2012). It presents a picture of what a company owns and its overall liquidity. The balance sheet uses the formula, Assets = Liabilities + Shareholders' Equity. Companies pay for their...