Acc/280 Wk 1 Dq1

379 Words2 Pages
What are the four basic financial statements? According to our textbook Financial Accounting, the four basic financial statements are income statement, a retained earnings statement, a balance sheet and a statement of cash flows. What do the different financial statements tell you about a company? The income statement is about the “revenues and expenses and resulting net income or net loss of a company for a specific period of time.” (Weygandt, J.J., 2008) A retained earnings statement “summarizes the changes in retained earnings for a specific period of time.” (Weygandt, J.J., 2008) The balance sheet will list all of the assets and liabilities that the company has and on a particular date, the stockholder’s equity will be listed as well. The statement of cash flows will summarize what would pertain to the cash coming in “(receipts)” and the cash that would be coming out “(payments)” over a particular period of time. Which financial statement is the most useful? I would think that since all four statements would pertain to the company that they are all equally important. Why? The income statement is important because it will show whether the company’s revenue exceeded expenses for a specific period resulting in net income or the amount the company may have lost because the expenses exceeded the revenue. The retained earnings statement is equally important because it will indicate the exact reason why the company’s retained earnings increased or decreased over the reporting period. The balance sheet is important because it is the overview of the company’s financial condition at the time of the reporting period and the statement of cash flow’s is important because “Reporting the sources, uses, and change in cash is useful because investors,creditors, and others want to know what is happening to a company’s most liquid resource.” (Weygandt,
Open Document