Week 2 DQ - In what ways do the elements of the four...

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In what ways do the elements of the four financial statements (The four main financial statements being: balance sheet, the income statement, the statement of cash flows, and the statement of changes in owners equity.) interact with one another? How might changing one of the financial statements affect the other financial statements? Why is it essential to understand the relationship between the financial statements? ANSWER Financial statements present a visual way to the viewer an organization's money, and where it came from, where it's going, and its current standing. The four main financial statements-balance sheets, income statements, cash flow statements, and statements of shareholders' equity-are such visual illustrations. The balance sheet presents to the organization thorough information in regards to the assets, liabilities, and shareholders' equity. Income statements account for the total revenue received over a given time, usually a calendar year or a fraction of that year. It even demonstrates that total revenue's associated costs and expenses, as well as EPS (earnings per share) - thus allowing for a show if the organization has made a profit or not. Cash flow statements present the flow of cash coming in and out of the organization, showing whether the organization has generated cash. The statement of shareholders' equity presents adjustments of the organization's interests over a period of time. These statements are all linked together. The balance sheet's assets and liabilities are mirrored upon the income statement's revenues and expenses - allowing a presentation of the organization's increase or decrease in gains/losses. Cash assets are presented by information stated in cash flows, seen on a balance sheet, which correlates with income displayed upon an income statement, although not entirely. The statement of shareholders' equity allows for a view
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This note was uploaded on 10/05/2010 for the course ACC ACC561 taught by Professor David during the Spring '10 term at University of Phoenix.

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Week 2 DQ - In what ways do the elements of the four...

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