Ron_W5_FinalPaper - Financial Statements Importance of the...

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Financial Statements 1 Importance of the Financial Statements Ronald Campbell Principles of Accounting I ACC205 Keith Graham December 6, 2010
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Financial Statements 2 Importance of the Financial Statements In this paper I will talk about how important the financial statements are and why they need to be accurate for the outside business interests, and why they are not important for lenders and other outside investors. The first thing we should ask you what is a financial statement? Financial statements “are business documents that report on a business in monetary terms” (Hornger & Harrison 2007, pg.17). All financial statements are essentially historically documents. The most common financial statements include the balance sheet, the income statement, the statement of changes of financial position and the statement of retained earnings. These statements are used by management, labor, investors, creditors and government regulatory agencies, primarily. The financial statements tell what has happened during a particular period of time. The financial statements hold “companies accountable for how money is earned and spent, down to the very last detail” (Lawrence, A., 2006). A lot of companies use the financial statements to make their business decisions and concerned it will also predict what might happen in the future of a company. Financial statements are prepared immediately after the adjusted trial balance. If one knows how to record transactions, do a trial balance and make adjusting entries it gives the person a better understanding of the information the financial statements contain. The financial
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This note was uploaded on 01/05/2011 for the course ACC 205 taught by Professor Robertcarr during the Winter '10 term at Ashford University.

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Ron_W5_FinalPaper - Financial Statements Importance of the...

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