Financial Statement Diferentiation

Financial Statement Differentiation

Financial Statement Differentiation
There are four different kinds of financial statements. These include the income statement, the statement of cash flow, the balance sheet, and the retained earnings statement. Each statement has a different focus and are used by investors, managers, and creditors to help make decisions about a business. Knowing which statements need to be used and when will help make any business more aware of where their funds are going.
The Income Statement
“An income statement is a financial statement that measures a company’s financial performance” (Investopia, 2015). The income statement will usually cover a precise time period. It reports both the success and failures f the company during that period that is covered. An income statement lists the company’s expenses and their revenues, which allows for the net income to be determined by subtracting the expenses from the revenues (Kimmel, Weygandt, & Kieso, 2011). Income statements are often used by creditors to determine if a company can afford to repay a loan. Income statements are an important part of business accounting, and show the profit and loss for the company.
The Statement of Cash Flows
A statement of cash flows is a quarterly report that all publicly traded companies are required to disclose to the SEC, Securities and Exchange Commission, and to the public (Investopia, 2015). The sheet provides information regarding any cash inflows the company receives form all sources. It also shows the cash debits that pay for any business actions or investments throughout that specific period. Since cash is the most important thing for any company, investors, manager, and creditors are all interested in the statement of cash flows.

The Balance Sheet
“A balance sheet is a financial statement that summarizes the company’s assets, liabilities and shareholders equity for a specific time. The areas covered in the balance sheet give...