Week 2

Richard Cathey

Accounting is defined as the process of recording and classifying the financial activities of a business, this mathematical process is also used as a method to record financial events. Its basis is to summarize financial activities and analyze and interpret the results from those activities. In today’s businesses accounting is used across the organization. Everyone from managers, supervisors to investors and creditors must learn and should understand this vital information if a successful company is desired. There are four different types of financial statements used in accounting. The statements of income statement, balance sheet, retained earnings statement, and statement of cash flows will be discussed in further detail throughout the paper.
Balance Sheet
“The balance sheet displays a company's financial point at the end of a specified date. Some interpret the balance sheet as a "snapshot" of the company's financial position at a point in time” ("Balance Sheet", 2004 - 2012). Business managers and investors can utilize a balance sheet to figure the amount assets, liabilities and stockholder equity that a business has. The balance sheet is simply a company’s assets that equals to their liabilities plus the equity the company holds. The main foundation of assets can be classified into two groups, current assets or fixed assets. Current assets are assets that can be easily liquidized into cash like accounts receivable, marketable securities, notes receivable, inventory, and insurance. Fixed assets are assets that are tangible like land, buildings, and equipment. Equity is the value of property beyond the total amount owed on its mortgages and liens.

Income Statement
Income statement is the second key financial statement. This statement is used for capturing statements of current business operations and provides business owners with information on revenues, income, and expenses. The income statement is a...