Financial_Statements

Financial Statements Micheal Deckard Accounting/561 October 26, 2010 Dr. Ronnie Ford Financial Statements Taking a closer look at the four financial statements will be show how they interact with one another and how the changing of the financial statements affects the outcome of the information that is needed. The importance of understanding the relationship between the financial statements will be examined as well. Elements of the financial Statements: The elements of the financial statements closely interact. The revenue is the amount a business earns from the sale of an item. The expense is the amount that the business incurs in the course of doing business. Assets are what the company own as the liabilities are what the company owes. The financial statement helps to show the state of the business affairs of the company monthly, quarterly, and annually. All of these statement are used in conjunction to help the company make informed decisions regarding balancing of the company’s liabilities and expenses must be subtracted the assets and revenue to seek the best options for the health of the company and the stockholder’s. Changing of the financial statements: The four basic financial statements are linked together. The net income from the income statement goes together with the statement of equity which then correlates to the balance sheet. The ending balance on the cash flow statement then flows back over to the balance sheet. It is important to understand that all entries correlate and are dependent with the previous statements or reports. “Hallmark of the accounting profession has been its ethics and integrity. Most Accountants and auditors are highly ethical and truthfully report their financial results in accordance with GAAP.”(Holmgren, C., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008. Relationship between the financial statements: It is important to understand the relationship between the financial statements because they are working in conjunction with one another. Members learn about the financial health of their organization by reading the financial statements. If there is one certain piece of information that is incorrect one of the statements then all of the information becomes skewed at that point References Holmgren, C., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Islip, NV: Prentice Hall. Invetopedia.com. Balance sheet. (October26, 2010). Retrieved from http://http://www.investopedia.com/terms/b/balancesheet.asp http://www..omafra.gov. Retrieved on October22nd, 2010.