The Importance of Financial Statements

The Importance of Financial Statements - The Importance of...

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The Importance of 1 Running head: THE IMPORTANCE OF FINANCIAL STATEMENTS The Importance of Financial Statements Joey D. Finley University of Phoenix ACC 280 Principles of Accounting March 22, 2010
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The Importance of Financial Statements “You have to know accounting. It's the language of practical business life” (Munger, n.d.). To have knowledge of accounting, an individual has to comprehend initially the reason or purpose of accounting. Additionally, four basic financial statements in accounting interconnect or interrelate with each other. The four statements are important to the certain personnel, managers, investors, creditors, and employees, in different ways. The purpose of the accounting staff is to make available the figures required for well planned financially viable decisions to be made. “Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users” (Weygandt, 2008, p. 27). The four basic financial statements in accounting stated by Weygandt, 2008 are the income statement, retained earnings statement, balance sheet, and statement of cash flow. An income statement will represent the profits, operating expenses, and the resultant net earnings. The retained earnings statement examines the main points of change in preserved income for a detailed time frame. The balance sheet explains specific information about the assets, liabilities and stockholder’s equity of the company. The report dealing with cash flow compiles together the numbers in relation to
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The Importance of Financial Statements - The Importance of...

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