Financial Statements includes the income statement, statement of retained earnings, balance sheet, and statement of cash flow.
Income Statement: An income statement is a financial statement that shows a company's profit or loss for a particular period. It shows the revenue minus expenses for a particular time period.
Statement of Retained Earnings: A financial statement that shows the changes of a company's retained earnings(equity) over a period of time.
Balance Sheet: A statement that depicts the company's assets, liabilities, and equity. In other words it shows the financial position(health) during a certain time period.
Statement of Cash Flow: A financial statement that shows the amount of cash and cash equivalents leaving a company for a time period.
Who are the users of financial statements? When it comes to financial statements there are two groups of users: internal users and external users. Internal users are directly involved in operating and managing the business or organization. They use financial statements to help improve the business or organization. External users are not directly involved in running the organization. Examples are brokers, lawyers, investors, and Banks (lenders). All external users do not utilize financial statements for similar reasons. For example, lenders use accounting information to assess whether a business or organization will be able to pay loans with interest, and investors use financial statements to determine whether it is worth investing in a business.
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